Strategies For Getting Out of Debt

According to recent data, the average American carries about $63,500 in debt. This debt includes mortgages, credit cards, student loans and auto loans. For most, juggling this kind of debt can feel overwhelming. However, with a solid strategy, you can chip away at the debt. Find out individual strategies to target credit cards, student loans, mortgages and collection debt.

Key Takeaways

• Call first, panic later. Contact the lender or loan servicer the moment you expect trouble — most credit card issuers won't report a late payment to the bureaus until it's 30 days past due, so early contact can unlock hardship options.

• Verify a collection before you pay a cent. Under the FDCPA, a debt collector must send a written validation notice within five business days of first contact, and you then have 30 days to dispute it.

• Watch the statute of limitations. Most states bar lawsuits on old debt after three to six years, and making a payment or acknowledging the debt in writing can restart that clock.

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If You’re Behind on Your Credit Card Debt

According to the Federal Reserve Bank, the total credit card debt in the United States is $1.26 trillion. As of May 2025, the average credit card balance is $7,279. So if you’re facing credit card debt, you’re likely not alone. What’s the strategy if you’re behind in paying your debt? Here are a few approaches that may work for you based on how far you behind you are:

A Missed Payment

• If you’ve missed one payment, contact the credit card lender immediately. Don’t wait. Credit card lenders won’t report this to the bureaus until the payment is 30 or more days late.

• Ask to waive the late fee. If you’ve always been timely on your payments, ask for the late fee to be waived. Generally, credit card companies will waive the late fee if it’s a first-time request.

• Make the minimum payment. If you can, try to make some of the minimum payment. Even a partial payment is better than no payment at all.

You Can’t Afford the Monthly Payment

• Call the credit card lender. Let them know that you can’t afford the payment. If you have documentation of job loss, medical bills or other hardships, let them know.

• Request a hardship program. Credit card lenders, if the circumstances warrant, will lower interest rates, pause payments temporarily or give you an extension.

• Get agreements in writing. If the credit card lender does grant you a hardship request, make sure there’s a written agreement documenting the change.

You’ve Got Multiple Credit Cards and You’re Falling Behind on All Minimum Payments

• Understand all your balances. It’s helpful to list your credit card balances and the respective interest rates. Note the high balances as well as the high interest rate cards and aim to target those first.

• Use the snowball method or debt avalanche method. With the snowball method, you’ll pay your minimums on all cards and then any extra funds will go to pay the smallest balance. You’ll repeat this process and target the next smallest balance. With the avalanche method, you’ll pay the minimums and use extra funds to target the highest interest credit card.

• Consider a 0% APR credit card. If you can transfer the debt to a 0% credit card, you’ll save money on interest. Make sure you’re able to pay the balance during the promotional period.

Your Account Is in Collections or About To Be in Collections

• If you’re severely late and want to prevent your account from going to collections, contact the credit card lender to see if you can negotiate what’s owed.

• If your account is in collections, ask for the debt to be verified in writing. Under the law, the debt collector is required to confirm your debt.

• Try to negotiate. Creditors and debt collectors would rather receive some money than none. Keep the communication channel open.

If You’re Behind on Your Car Loan

Auto debt is at an all time high. At the end of 2025, auto debt reached $1.68 trillion, according to CNBC. One in four Americans are likely to carry auto loan debt. If you find yourself behind on your car loan, here are some strategies that may help you get back on track:

Missed One Payment

• If you’ve missed one payment, call the lender as soon as possible. If you’ve made timely payments in the past, ask for an extension. Most lenders will likely give you the extension if this is your first request.

You Can’t Afford Future Payments

• If you can’t afford a single payment, call and ask the lender whether you can get a loan modification or deferment. You’ll likely have to demonstrate proof of why you can’t afford the current payment.

• If you’re likely to miss multiple payments and have good credit, ask the lender if you can refinance your current loan. You may be able to get a rate that you can afford.

Despite Your Efforts You’re Simply Unable To Afford the Car

• Sell the car yourself and apply the proceeds to pay off the loan, especially if it covers the full amount.

• Ask for a voluntary surrender.

Repossession Is a Real Possibility

• If your car is in danger of being repossessed, contact the lender and determine if you can get a reinstatement. The reinstatement is a way to catch up on missed payments.

• If the car is repossessed, you’ll still owe the balance that remains after the sale of the car.

If You’re Behind on Your Student Loans

Falling behind on student loans is not ideal, but it’s a debt you can address because there are more choices for help. One of the first things to determine is whether you’ve got federal or private loans because this will dictate the debt option you can choose.

If You’re Struggling To Pay Your Federal Loans

• If you’re paying back a federal loan, you can opt for an income-driven repayment plan. Your payment will increase or decrease based on your earnings. After 20 to 25 years of consistent payments, the federal government will forgive the remaining balance.

• You can also request a forbearance if you can show temporary hardship.

• You can explore forgiveness programs if you’re employed in a government job or qualifying nonprofit.

If You’re Struggling To Pay Your Private Loans

• Contact your lender to ask what options are available. Private lenders can offer temporary forbearance or reduced payments.

• You can also request refinancing.

If Your Federal Loans Are in Default

• Ask about loan rehabilitation. Rehabilitation of federal loans takes nine months of consecutive payments for the default notation to be removed.

• Ask about loan consolidation. You can restart making payments with a new repayment structure.

If Your Private Loans Are in Default

• You can negotiate a settlement with your lender.

• You can also try a modified payment plan if your lender agrees.

• Make sure you get your private lender’s agreement in writing.

If You’re Behind on Your Mortgage

Getting behind on your mortgage is scary, but communicating with your loan servicer can be key to helping you keep your home. Loan servicers are often willing to work with you because they understand it’s your home. Here are some strategies to help:

You’re About To Miss Your House Payment

• If you’re about to miss your payment, let the loan servicer know. By communicating that you're behind, your lender may be able to give you options.

• Ask about the grace period. Many mortgages have a grace period attached, so letting the loan servicer know can work to your advantage.

• Ask about hardship assistance. Loan servicers may be able to give extensions if they know your circumstances.

You Can’t Afford Payments Because of a Temporary Hardship

• If you can’t afford your payments, call and ask the lender whether you can get a loan forbearance. You’ll likely have to demonstrate proof of why you can’t afford the current mortgage payments.

• Consider refinancing. Refinancing at a lower rate may be a great way to afford payments in the long term.

• Ask about a repayment plan.The servicer may be able to tack on the payments you missed to future payments. It gives you the chance to catch up over time.

You Can’t Afford To Pay for Your Home Long-Term

• You can sell your house. You may come out ahead if you have equity in your home and can afford to pay off the loan and manage to keep some funds for yourself.

• You can ask for a short sale. If you owe more money than the house is worth, ask the loan servicer for a short sale. The lender may approve selling it for less than the balance. This is a better option than a foreclosure.

Foreclosure Is a Real Possibility

• If your house is in danger of being foreclosed, contact the loan servicer, and determine if you can get a reinstatement. The reinstatement is a way to catch up on missed payments.

• Understand your foreclosure rights. Foreclosure rights vary state-by-state. Some states give the homeowners the right to redemption.

If Your Debt Is in Collections

It may be surprising to hear, but recent data suggests that 77 million Americans have at least one account in collections. The average balance in collections is about $2,000. If you find yourself in this situation, you shouldn’t ignore collectors or collection notices. Here’s how to approach collectors:

1. Don’t ignore the notices from the collectors. Contact them immediately. Waiting will escalate the problem.

2. Reach out to the collectors and ask for the debt to be verified. Before you pay, ask for the details on what you owe. The debt collector, under the Fair Debt Collection Practices Act, must provide written details of the debt. You can check if the debt is truly your debt.

3. Check for errors. It may be the wrong balance, not your debt, or the debt is already paid. Mistakes happen so do a thorough check.

4. Find out the age of an old debt. Be careful on paying off old debt. If the statute of limitations has expired in a specific state regarding the debt, repaying can cause the clock to restart. You don’t want to pay an old debt that’s essentially unenforceable.Your payment can reinstate the debt and give the collector a new window to collect.

Your Plan of Action To Deal with Debt Collectors

• Try to negotiate. Often debt collectors will take less than the amount owed.

• Pay-to-delete request. Sometimes collectors will delete the collection from your credit report in exchange for payment.

• Ask for a payment plan. Let the collector know what you can realistically pay and work out a payment plan.

• Get all conversation in writing. Do not rely on a verbal assurance; request the agreement be in writing before you decide to pay.

Professional Help

If you’ve tried to address your debt and nothing is working, it may be time to ask for professional help. There are experienced individuals and companies available to help you navigate the debt process.

Credit Card Debt

If there’s no clear resolution and you’re falling more and more behind, it may be time to make an appointment with a nonprofit credit counseling company. A credit counselor can take a look at your credit card debt and help you establish a debt management plan with lower interest rates. Typically this is a low cost way to reduce your overwhelm and have a clear strategy to make headway with your credit card debt.

Car Loan

If you’re uncertain on how to proceed or how to handle a delinquent car loan, you can also consult a nonprofit credit counselor to get a clear idea on how to handle a debt. If your car is in danger of repossession, you can reach out to an attorney (nonprofit) to understand your rights and how deficiency balances are treated in your state. Student Loans A nonprofit credit counselor can help with a plan to organize not only student loan debt, but also other debt. If it’s a more complicated situation regarding your student loans, you can also hire a student loan attorney.

Mortgage

If you’re overwhelmed by mortgage payments, there’s actually help available that’s free. You can call a HUD-approved housing counselor who will review options with you and even serve as a representative in talking with your lender. If foreclosure is a possibility you can talk to a real estate attorney for assistance

Collections

If multiple collectors are suing you and you’re not sure what you should do next, you should reach out to a consumer attorney at a legal aid office. You can also reach out to a nonprofit credit counselor to get help. Both options are low-cost choices to get help with accounts in collections.

FAQ

Is debt consolidation a good idea?

Debt consolidation can be a good idea if your interest rates are lowered and you’re able to make a single payment. You’ll also need to reflect on why you’re running up debt so that you address overspending, splurging and mindless purchases.

What is a debt management plan?

A nonprofit credit counselor will establish a plan for you, and ideally your interest rate will be lower. You may be able to lump multiple payments into one.

Can debts become too old to collect?

Many states have statute of limitations on collections of debt. After the statute of limitations runs out on a specific debt, you can’t be sued. However, a partial payment can restart the clock and give the collector a window to sue. Always check the age of your debt before making a payment.

Are debt relief companies safe?

There are legitimate debt relief companies, but make sure you watch out for red flags. If they provide a guarantee that they can erase your debt, ask for upfront fees, and if you can’t verify their business information, it’s likely a scam.

Can I be arrested if I owe money?

You can’t be arrested if you owe debt. However, lenders can sue you in civil court to collect the debt.

Key Terms

• Secured debt: A loan backed by collateral, like a car or house, that the lender can repossess or foreclose on if you don't pay — which is why auto loans and mortgages are rarely forgiven outright.

• Deficiency balance: The amount you still owe after a lender sells a repossessed or surrendered vehicle for less than your loan balance.

• Debt validation notice: The written notice a collector must send within five business days of first contact, listing the original creditor, the amount owed and how to dispute it.

• Statute of limitations: The state deadline — typically three to six years — during which a collector can sue over an unpaid debt; a payment or written acknowledgment can restart it.

• Forbearance: A temporary pause or reduction in payments a lender may grant during hardship; interest often keeps accruing during the pause.

• Income-driven repayment (IDR): A federal student loan plan that sets payments based on income, with possible forgiveness of the remaining balance after a set repayment period.

• Loan rehabilitation: A federal student loan program that can remove a default notation after a series of consecutive on-time payments.

• Short sale: Selling a home for less than the mortgage balance with servicer approval — generally less damaging than foreclosure.

Sources

• CFPB — Debt Collection (your rights and the FDCPA)

• Federal Reserve Bank of New York — Household Debt and Credit Report

• FTC — How To Get Out of Debt

• Federal Student Aid — repayment, forbearance and getting out of default

• HUD — Find a Housing Counselor

Summary generated by AI, verified by MoneyLion editors