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.

As we start off 2025, your New Year’s resolution may be to learn a new skill, exercise regularly or get more sleep. But if you’re facing overwhelming monthly payments from 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 are thinking about making financial resolutions at the start of the new year, and paying down debt is the second-most common goal, according to Fidelity’s annual Financial Resolutions Study. The focus on debt isn’t surprising: U.S. consumers owe a collective $17.9 trillion in total debt, according to the Federal Reserve Bank of New York’s most recent data — and credit card debts are climbing alongside delinquency rates. 

That debt burden may 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 take 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 money you can afford to put toward those payments right now. List out all of debts, including the amount of your monthly payments and deadlines. 

Next, take a look at the money you currently have 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 some more funds each month to paying off your debt, great. But if you can’t, there are other options to make progress (see 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, which involves lining up all your debts from smallest to largest and tackling the smallest debt first. Then, you move onto the next smallest until you’ve paid off all your debt. Just be sure you’re still paying the minimum monthly payments on all your debt 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 the 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. 

If you have more disposable income, you may be more inclined to use the debt avalanche approach, Small adds. This strategy involves paying down the debt with the highest interest rate first, then moving on to the debt with the second-highest interest rate. That first debt you pay off may not have the smallest balance — it could even have the highest — but this approach would save you money in interest over time. ​​

The reason someone with a lower income may opt for the snowball strategy is that in many cases, the higher interest debt is the debt with the highest balance. If a borrower with less discretionary income is focusing on the highest interest, they may have to forgo paying the minimums on the other debts, which can slow down the debt payoff considerably, Small explains. 

Another reason some folks prefer the snowball method? It’s motivating. You’ll see your individual debts wiped out more quickly this way.

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 thus far. Sometimes, you can even 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 an annual percentage rate (APR) as low as 0% for a set period of time, or taking out a personal loan. 

The best option for you will depend on your specific situation, including how much debt you have and what type, your credit score and whether you are willing to put your home on the line. Whichever option you choose may be able to 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’re asked to pay a monthly minimum doesn’t mean you have to stick to that amount. In fact, paying more than the minimum is going to be one of the best ways to pay off your debt faster. This can come in especially useful if you find yourself with consistent 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 on 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 will agree to adjust the payment plan or even reduce the amount you owe. Creditors may be willing to settle your debt for less than the total amount owed if you can pay them a lump sum amount immediately. This comes with risks, namely that your credit score will take a hit if you stop making payments (often a necessary move to gain the leverage to negotiate) and if you don’t fulfill the initial lending agreement, which is usually the result of negotiating. 

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 should be celebrated. Small says to establish intermittent milestones, like working through 10% of the debt. Once you hit that goal, you can reward yourself by using some of your discretionary income (after paying your minimum monthly payments) to have a nice dinner out or make a purchase. 

“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.