6 Steps to Finally Get Rid of Your Debt in 2025

This article is a guest post by Mallika Mitra, a personal finance writer from Money.com. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Freedom Debt Relief.

For 2025, your New Year’s resolution may have been to learn a new skill, exercise regularly, or get more sleep. But if you’re facing overwhelming monthly payments on your credit cards or car and student loans, your goals for the new year likely include getting rid of debt. 

If that’s the case, you’re not alone. About two-thirds of Americans think about making financial resolutions at the start of the new year, and paying down debt is the second-most common financial goal, according to Fidelity’s annual Financial Resolutions Study. 

The focus on debt isn’t surprising: People in the U.S. owe a collective $18.04 trillion in total debt, according to the Federal Reserve Bank of New York’s most recent data—and credit card debts are climbing alongside late-payment rates. 

That debt burden can make you feel anxious, but there are simple steps you can take to make your debt-free resolution a reality. Here are six steps to finally get rid of debt in 2025. 

1. Get organized 

The first step to making a dent in your debt is to know exactly how much you owe, and how much you can afford to put toward those payments right now. List out all of your debts, including the amount of your monthly payments and deadlines. 

Next, take a look at the money currently going into and out of your bank account each month. Using a budgeting app may be helpful here, so you can see exactly how much of your cash is going to essentials like groceries and bills, and how much is going to nonessentials like eating out and movie tickets.

If you’re able to adjust your budget so that you can put more funds each month toward paying off your debt, great. But if you can’t, there are other options to help you make progress (see especially steps three and five). 

2. Choose the right repayment plan 

The ideal payment plan for one person may not make sense for another. 

André Small, a certified financial planner based in Houston, Texas and founder of A Small Investment, says that 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 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. Just be sure to keep paying the minimum monthly payments on all your debts while you’re doing this. 

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 can help give you motivation to stay on track.

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. ​​

3. Shop around for a lower rate 

If you have several monthly debt payments, it might make sense to explore debt consolidation. The strategy entails swapping out your various monthly debt payments for a new one—ideally with a lower interest rate than what you’ve been paying. 

Sometimes, you can snag a lower rate and a lower monthly payment, freeing up cash for other bills, more expensive debt, or savings.

There are three main types of debt consolidation: 

• Tapping your home equity via a home equity line of credit (HELOC) or home equity loan 

• Using a balance transfer credit card with a low or 0% APR offer 

• Taking out a personal loan. 

The best option for you depends on your specific situation, including how much debt you have, your credit score, and whether you’re willing to put your home on the line as collateral. Whichever option you choose may save you money in interest and help you pay off your debt faster than your current plan. 

4. Pay more than the minimum 

Just because you have to pay a monthly minimum doesn’t mean you have to stick to only that amount. Paying more than the minimum is one of the best ways to pay off your debt faster. This can be especially useful if you consistently find yourself with extra cash from something like a raise at work, or a large one-time lump sum, like an inheritance. 

“It depends on the person, but if they’re really serious about [paying off debt], I would suggest throwing as much discretionary income as they have to paying off the debt,” Small says. 

However, you’ll want to check whether your lender has any prepayment penalties. These are fees that some lenders charge for paying off your debt early to make up for the interest they’ll miss out on, though they’re much less common nowadays than they used to be.

5. Negotiate with your lenders for debt relief

If you’re not able to meet your current payment requirements, it may be worth speaking to your credit card companies and other creditors to see if they’ll adjust the 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 comes with risks—your credit score will take a hit if you stop making payments (a move people sometimes use to gain more leverage for negotiating). It will also take a hit if you don’t meet the initial lending agreement, which is usually the result of negotiating. 

Get rid of debt with professional debt settlement help

You can speak to your lender directly or bring in a professional: Debt relief companies will negotiate on your behalf, though you’ll have to pay a fee based on the amount of debt that’s enrolled. 

Industry data shows that about three-quarters of debt relief clients had at least one account settled within 24 months of signing up, with the average client getting a roughly 30% reduction on their debt — after accounting for fees.

6. Reward yourself along the way

Paying off debt can be a long and challenging road, and the wins along the way are worth celebrating. 

Small says to 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. 

“But that’s not to be done for more than a month,” Small adds. The next month, start back up with paying back your debt.

Tips to get rid of your debt forever

The only thing that feels better than finally getting rid of your debt is knowing you have the knowledge and tools to avoid debt traps going forward. 

Consider these tips for staying out of debt long term:

• Stick to your budget. Organizing your finances with a budget is step one of paying off debt, but don't stop budgeting once the debt is gone. Update your budget to reflect your new financial goals and stick to it!

• Ask for a raise. Increasing your income can do wonders to help you avoid debt, but you have to be proactive. Studies show that asking for a raise is at least partially successful around two-thirds of the time, so the odds are in your favor for a positive outcome. 

• Change jobs. If asking for a raise doesn't work—or you're ready for a change—consider taking on a new role somewhere else. Data suggests that people who change jobs get better pay increases on average than folks who stay put.

• Focus on savings. A robust emergency fund that can cover at least a few months' worth of expenses can keep you out of debt if you lose your job or face other financial hardship.

• Boost your credit scores. Creditors and insurers give better rates and terms to people with good credit scores. Don't cancel every credit card once the debts are paid. Instead, use just one or two cards each month, then pay them in full to help improve your positive payment history.

• Maintain good insurance. Most of your assets can be insured to some extent in case of natural disasters or other emergencies. Make sure you have enough renters, homeowners, auto, pet, and health insurance to protect your investments.

Above all else, stay positive! You have the power to get rid of your debt and keep it gone.