6 Steps to Finally Get Rid of Your Debt in 2026

Household debt in America is over 18 trillion dollars, according to the Federal Reserve Bank of St Louis. With so much debt, it’s not surprising that many Americans want to be debt-free. 

If you are looking for debt relief and you want to say goodbye to your debt for good, take steps to free yourself from your creditors in 2026. Here’s how. 

Why 2026 Is the Right Time for Debt Relief

Debt is always a financial burden. But it has become more difficult for many people to manage in recent years, thanks to rising interest rates. 

Rates have risen in the post-COVID era in response to troubling economic conditions, including a surge in inflation caused by supply chain disruptions and COVID-19 stimulus spending. These conditions caused the Federal Reserve to repeatedly raise the benchmark interest rate. 

While that benchmark rate doesn’t directly control interest rates on debt, it impacts them by raising or lowering the cost at which banks borrow from each other. Added costs are typically passed on to customers in the form of higher interest rates on debt. 

According to the Federal Reserve Board, for example, the average interest rate on credit cards is 21.16% as of May 2025. By comparison, in May of 2020, the average interest rate was 14.52%. 

Card interest rates may also increase or stay high into 2026 even if the Federal Reserve changes the benchmark rate, because of growing creditor concerns about rising defaults. When creditors are afraid customers won’t pay, they often raise rates.

Experian also reports average interest rates on auto loans hit 11.7% for used vehicles and 6.73% for new cars in March 2025. That’s up from 9.33% and 5.22% in 2020. Personal loan rates are also higher.

With many kinds of debt becoming more expensive, many people want to deal with their debt for good—especially given the ongoing economic uncertainty around tariffs, and with a recession threat looming that could affect employment prospects.  

If you are afraid of rates rising or the economy faltering, positioning yourself to become debt-free ASAP is one of the smartest things you can do. It helps you avoid borrowing costs and eliminate monthly debt payments that could strain your budget.

Even if you aren’t worried about rising rates, the longer you carry debt, the costlier it is, the more frustrating it can be, and the harder it is to accomplish other goals. In fact, starting a new year owing money can take a psychological toll. So no matter your exact circumstances, it’s worth getting out of some debt in 2026 by pursuing options like credit card debt relief or payback using the debt snowball or debt avalanche methods.

Step 1: Get Organized

To become debt-free in 2026, get organized and create an effective payment plan. Start by gathering a few key documents and pieces of information. That can help you understand what you owe and how much you can truly afford to pay toward becoming debt-free. 

Here are the key steps:

• Make a complete list of your outstanding debts, the interest rates, and the balances due.  

• Check your credit report to make sure you’ve listed everything correctly, and that it doesn’t contain any accounts you did not open (because of mistakes or fraud). AnnualCreditReport.com is a great resource for obtaining your credit file for free, and seeing outstanding debt at a glance.

• Track your spending. Look at your bank and credit card statements to track your spending. Using a budgeting app may be helpful here to see exactly how much of your cash is going to essentials like groceries and bills, and how much is going to non-essentials like eating out or movie tickets.

• Identify how much more you can pay each month toward your debt: Carefully consider budget cuts to free up extra money to put toward becoming debt-free.

• Research changes to legal rules: For example, in 2025 through 2028, car loan interest will be tax-deductible for eligible individuals as a result of provisions in the One Big Beautiful Bill Act. 

Using the information you collect, determine the following: 

• Total outstanding debt

• Balance of each debt, and the interest rate you are being charged

• Whether interest for each is tax-deductible (remembering that the rules can change over time, so checking again in future is smart)

• Due date for monthly payments

• Funds you could use toward debt payoff 

Getting organized gives you a clear picture of where you stand, what time frame for debt payoff is realistic, and what debt relief options are worth pursuing. 

Step 2: Choose the Right Repayment Plan 

You should pay extra on at least some of your debts if you want to become debt-free in 2026. The two main methods are the debt snowball and the debt avalanche. Here’s how each one works.

Debt snowball

The debt snowball approach involves lining up your debts from smallest to largest, and tackling the smallest debt first. Then you move onto the next-smallest. You continue this way with all your debts until you’ve paid everything off. You keep paying the minimum monthly payments on all your debts while you’re doing this to keep them current. 

For example, say you have $200 of discretionary income in a month, and $10,000 of credit card debt across five credit cards. Pay the minimum payments on all five credit cards, but allocate as much of that $200 as you can to paying off the credit card debt with the smallest balance. When that’s done, move on to the credit card with the second-lowest balance.

A big benefit of the debt snowball method is that you pay off your first debt quickly, which could help motivate you to stay on track.

André Small, a certified financial planner based in Houston, Texas and founder of A Small Investment, says many of his low-income clients prefer the snowball approach, while people with more discretionary income may be inclined to use the debt avalanche.

Debt avalanche

The debt avalanche approach involves paying down the debt with the highest interest rate first, then moving on to the debt with the next-highest interest rate. As with the snowball, make at least the minimum payment for all of your cards, with extra money going to the card with the highest APR (annual percentage rate).

That first debt you pay off may not have the smallest balance—it could even have the highest—but this approach saves you money in interest over time vs. the debt snowball method. ​​That’s because you pay off the costliest debt first. However, you may not score quick wins with this approach, so it may not be the best one if you think you’ll struggle to stay motivated. 

Step 3: Understand Your Debt Relief Options in 2026

Sometimes, simply making extra payments is not enough to help you become debt-free in a reasonable amount of time. If you have a substantial amount of debt or you struggle to make payments at all, consider these debt relief options. 

Each option has pros and cons. Here’s a little more detail about how each works:

• Debt consolidation: If you qualify for a debt consolidation loan, this can be a great option. You get a new loan, ideally at a lower rate, to repay all the current debts. This simplifies things, since you have only a single payment. Depending on whether you make your loan term longer or shorter, it could also lower total borrowing costs, as long as you aren’t paying for much longer than you were on the loans you consolidated. 

• Debt settlement: You or a debt relief company negotiate with creditors and get them to accept a lump sum payment or payment plan for less than the full amount you owe. This could hurt your credit but also make it much easier to get on firm financial footing if your balances are substantially reduced. 

• Credit counseling: You work with a licensed counselor to review your finances and determine how much you can pay toward debt. Credit counselors offer financial counseling when you enroll in a debt management plan. That’s a structured payment program in which you make one monthly lump sum payment, and that money is distributed to creditors by the debt management company based on terms they’ve negotiated. 

• Balance transfer: This involves transferring credit card debt to a card offering you a promotional rate of 0% on transferred balances. Usually, there is a fee of around 3% to 4% to do the balance transfer. Unfortunately, you usually have only a short time at the 0% rate, so it’s easy to fail to become debt-free using this method. After the promotional period, the rates go up to the much higher rates typical of credit cards.

• Bankruptcy: With Chapter 7 liquidation bankruptcy, you turn over certain thing that you own to the court in exchange for having your eligible unsecured debt forgiven at the end of the proceedings. With Chapter 13 bankruptcy, you enter into a three- to five-year repayment agreement and must fulfill the repayment plan before any debt is forgiven. 

Freedom Debt Relief can negotiate debt settlement on your behalf if you decide this is the right approach. Typically, you make a monthly deposit into a dedicated account (that you own and control). When enough money is available in the account, Freedom Debt Relief negotiates with your creditors to accept less than the full amount due. Once the creditor has accepted a settlement and you approve it, payment is made from your dedicated account. When the terms of the agreement are satisfied, the debt is behind you and you don’t have to worry about it again.

Step 4: Qualifying for Professional Debt Relief Programs

Debt relief programs make debt payoff easier, but you must qualify to participate. Requirements vary, but generally you need:

• A minimum amount of debt: Typically, the minimum amount of debt required ranges from $5,000 to $10,000. 

• Unsecured debt: Lenders don’t generally settle secured debt (debt for which there is collateral guaranteeing the loan). As a result, your debt must be unsecured to participate in most professional debt relief programs.

• Proof of financial hardship: You must be facing challenges paying your bills, and may need proof of financial hardship, such as evidence of a job loss or income reduction. This helps in negotiating your debt settlement, since you can show creditors there is a reason you can’t make payments. 

• Steady income: You need to be able to afford to pay something towards your debt every month. Debt settlement can’t erase your debts completely. 

Freedom Debt Relief is a professional debt relief program that could make it easier for you to deal with your debts. You can reach out to get a free debt evaluation to find out if you qualify for the Freedom Debt Relief program. 

Step 5: Negotiate with Your Lenders for Debt Relief

If you’re not able to meet your current payment requirements, you can speak to your credit card companies and other creditors to see if they’ll adjust your payment plan or even reduce the amount you owe. 

Creditors may agree to debt settlement (accepting less than the total amount owed, but counting it as payment in full) if you can pay them a lump-sum amount immediately. This is one way Freedom Debt Relief works. Freedom Debt Relief negotiates with creditors on your behalf. 

Typically, creditors don’t settle debt unless you are already behind on payments. Creditors decide to accept a reduced amount if they fear that you will file bankruptcy, or if they are otherwise worried they won’t get any payments from you. 

You can and should keep setting aside money each month during this process, though. Put the money into a special account that’s just for debt settlement offers.

A professional debt settlement program typically takes two to four years to complete, and most people settle their first debt within a few months after joining.

While you could negotiate with creditors yourself, many people prefer to work with a company like Freedom Debt Relief to help with this process. That’s a smart choice, because debt relief companies have relationships with creditors and understand the reasons creditors settle—and the amount creditors are usually willing to accept. 

During the negotiation process, you provide evidence of financial hardship when possible, such as showing that you were laid off or had a medical issue making it impossible to earn enough to pay back your debt. You should show that this issue is likely to persist, so payment in full isn’t possible now or down the road. 

There are risks and downsides of debt settlement. For example, your credit score takes a hit if you stop making payments. 

The amount you settle for varies based on many factors, including how old the debt is, how much you owe, the nature of your financial hardship, and how successfully you (or your debt settlement company) negotiate. 

While every case is different, a lot of creditors agree to a settlement that’s 30% to 50% of the amount you owed, and forgive the remainder of the debt. However, your exact circumstances dictate your payback amount. 

Step 6: Reward Yourself Along the Way

Getting rid of your debt can be a long and challenging road, and the wins along the way are worth celebrating. Establish intermittent milestones, like working through 10% of the debt. Once you hit that goal, reward yourself by using some of your discretionary income (after paying your minimum monthly payments) with something like a nice dinner out, or a purchase you’ve wanted to make. Then, next month, start back up with paying back your debt.

Creating Your 2026 Debt Freedom Timeline

You have options for becoming free of your debt, including paying extra using the snowball or avalanche methods, consolidating debt, doing a balance transfer, or working with a debt settlement company to get relief. 

To make sure you stay on track, create a 2026 debt-freedom timeline so you can track milestones, measure progress, and stay motivated. Adjust this timeline based on the debt relief method you select, as well as how much extra you can pay toward your debt. Even with adjustments, making a timeline can go a long way toward keeping you on track. 

As you make your timeline:

• Establish key milestones to monitor and celebrate progress, such as paying off $500 or $1,000, or paying off a certain percentage of your debt by a specific date.

• Consider different factors throughout the year that could affect your payoff, such as getting a tax refund or work bonus you could put toward debt—or planning for holidays that could cost you money and cause a pause in extra payments for a short time. 

• Set realistic expectations for debt amounts. It may be reasonable to pay off $1,000 or even $5,000 or even $10,000 in debt by 2026 depending on your income, but it’s also fine to need a little longer if you owe more than you can reasonably pay off in a year. 

Once you make your timeline, stick to it. Check in regularly to confirm your progress so you can celebrate 2026 by saying goodbye to debt forever. 

People just like you are seeking debt relief in Colorado Springs, CO and across the country. The first step is the most important one—explore your options.