How can I get out of debt if I live paycheck to paycheck?

You can get out of debt if you live paycheck to paycheck with the help of a debt management program or a loan from a friend or family member who doesn’t expect repayment. Another thing that can help you get out of debt is adjusting your current budget to remove certain luxuries and make room for extra debt payments.

How to Get Out of Debt If You Live Paycheck to Paycheck

1. Use a debt management program

   Debt management programs are offered through lenders and third-party companies. These programs allow you to negotiate a new payment plan, which could involve lowering the interest rate, extending the repayment period or waiving fees.

2. Get a loan from a friend or family member

   A friend or family member may be willing to loan you money if you have limited income. Keep in mind that if you don’t repay what you borrowed, you risk damaging your relationship.

3. Choose a strategy to pay off balances

   One option is to repay your largest balances first, since they will accrue the most interest over time. To do this, allocate the majority of your debt-repayment budget to your largest balance and make the minimum payments on your other balances. After the largest debt is paid off, you can repeat this process until you’re free of debt.

   Another strategy is called the “snowball method,” which involves paying your smallest balances first before moving onto the larger ones. As you pay off your balances, you’ll keep allocating your debt-repayment budget to the next smallest balance, and eventually your debt will be paid off.

4. Use the “Island Approach”

   The Island Approach involves using separate credit card accounts for different transactions. For example, you may want to use one credit card account to manage a revolving balance and use another for everyday expenses that can be repaid in full every month. This method makes it easier to get out of debt by reducing the amount of interest you pay.

5. Get a debt consolidation loan

   You may be able to get a debt consolidation loan if you live paycheck to paycheck, but you might not get a very large loan and you could potentially receive a high APR. If you apply for a debt consolidation loan and receive a rate that’s higher than the ones you have on your existing debts, you should consider a different way to consolidate.

   You can estimate your potential rates with multiple lenders at once using the free pre-qualification tool on WalletHub.

6. Get a balance transfer credit card

   Getting a balance transfer credit card may be an option to help you get out of debt if you live paycheck to paycheck, too. However, if you cannot get a lower rate than your original debts, you should reconsider getting one of these cards.

7. Adjust your current budget

   You will have to adjust your budget to make more room for debt payments. It’s important to analyze how you’re spending your money to see where you can cut back. You will be able to allocate the money you’re saving to paying off your debt.

8. Use a debt settlement program

   With a debt settlement program, you’ll make payments to the company that is supposedly “helping you,” but they will often withhold payments from your creditors. This helps them get into a better negotiating position, but it will cause you to default. Debt settlement is very bad for your credit score, so you should only consider it as a last resort.

9. Monitor your finances

   Keeping track of your finances will help you manage your money better and can help you find your way out of debt. One way to keep track of your progress and improve your position is to sign up for a free WalletHub account. You’ll get personalized recommendations to improve your WalletScore, which is based on factors such as your credit score, spending, emergency preparation, and retirement planning.

You can read more about how to get out of debt on WalletHub.