How to Get Out of Debt on a Low Income

Quick Answer

You can pay off debt, despite having a low income, by taking inventory of what you owe and getting on a budget to avoid adding more debt. Then, research and compare different repayment strategies and consider whether debt relief and other financial assistance options could help.

A worried young woman, organizing home finances.

Paying down debt on a low income can be a daunting task. While there may be circumstances outside of your control, these steps can help you take stock of your situation and determine the best course of action for you, including tackling your debt on your own or seeking help.

1. Take Inventory of What You Owe

To get an idea of what you're dealing with, log in to your online account for each loan and credit card and record the following information:

  • Current balance
  • Monthly payment amount
  • Interest rate
  • Remaining repayment term (loans only)

Having these details on hand can help you evaluate your current financial situation, develop your repayment strategy and prioritize which debts to pay off first.

2. Make a Budget

If you don't already have one, creating a budget can help you better manage your money and potentially allocate more toward your debt repayment.

To start, gather information about your income and expenses over the past few months to get a bird's-eye view of your spending habits. Then, categorize each of your expenses to understand exactly where your money is going and where you may be able to cut back.

Next, research and compare different budgeting plans to determine which one works best for you, and set goals for your spending, saving and debt repayment each month based on your income. Depending on the situation, you may be able to cut back on expenses enough to pay down your debt more quickly.

Learn more >> How to Make a Budget

3. Avoid New Debt

As you maintain your budget and work to pay down your balances, it's important to avoid adding more debt. Don't apply for loans and credit cards unnecessarily, and if you're already using a credit card, consider putting it in a drawer and removing it from your digital wallet to avoid adding more to your balance.

Otherwise, it may feel like you're taking two steps forward and one step back, prolonging your repayment plan.

4. Use a Debt Repayment Strategy

There are several ways to pay off debt, but the right approach for you will depend on your budget and credit profile. Here are a few options to consider.

Debt Avalanche Method

With the debt avalanche approach, you'll start by making the minimum payment on all of your balances. Then take any extra cash you can put toward your debt and add it to the minimum payment on the account with the highest interest rate.

Once you've paid off that balance, you'll add the total payment (including the extra amount) to the balance with the next-highest interest rate. You'll keep doing this until all of your balances are paid in full, maximizing your interest savings along the way.

Debt Snowball Method

For the most part, the debt snowball strategy works similarly to the debt avalanche method. However, instead of targeting your debt with the highest interest rate first, you'll prioritize your lowest balance. This option won't help you maximize your interest savings, but if you're struggling to stay motivated, it could give you quick wins early on as you pay off accounts.

Debt Snowflake Method

The debt snowflake approach can be used on its own or in addition to other strategies. With this method, you'll take everyday savings, such as cash back rewards, coupon discounts and money you would've spent on something but didn't, and apply it to your debt.

Like individual snowflakes, these small daily savings can add up and have a huge impact over time.

Debt Consolidation

If you have good or excellent credit, you may consider using a debt consolidation loan or a balance transfer credit card to help pay down your debt balances.

  • Debt consolidation loan: A debt consolidation loan is a personal loan that could help with debt payoff by reducing your interest rate and giving you a set repayment plan. If approved, you'll move higher-interest debt, such as credit card balances, to the new loan and potentially save hundreds of dollars or more on interest costs. There may be an upfront fee, which is subtracted from the loan funds.
  • Balance transfer card: These cards can provide an introductory 0% annual percentage rate (APR) promotion, making it easier to pay down your debt faster and save money along the way. You'll transfer other, high-rate balances to the balance transfer card and pay off as much of the balance as possible before the promotional period ends and the card's standard interest rate kicks in. You'll typically pay an upfront fee of 3% to 5% of the amount transferred, which may be added to your card balance.

5. Reach Out to a Credit Counselor

If you feel like your debt situation is out of control or you don't qualify for debt consolidation options, consider working with a credit counselor. Nonprofit credit counseling agencies often offer free consultations to help with your budgeting and debt management.

During this process, the counselor may recommend a debt management plan for your credit card debt, which can help you potentially reduce your interest rates and monthly payments. You'll make one monthly payment to the counseling agency, which will then distribute the funds to your creditors.

Debt management plans typically last three to five years and come with a setup and monthly fee. However, you may qualify for discounted or waived fees if you're experiencing financial hardship.

Learn more >> How to Know Whether You Need a Credit Counselor

6. Consider Debt Relief

If you're behind on your debt payments, various repayment strategies and credit counseling services may not provide the help you need to get rid of your debt. If your financial situation is dire, you may consider debt settlement or bankruptcy as a last resort.

Debt Settlement

Debt settlement involves negotiating with your creditors to pay less than what you owe. If you've already missed payments, creditors may be willing to work with you if the alternative is selling the debt to a collection agency for pennies on the dollar or filing a costly lawsuit against you.

You can choose to enlist the help of a debt settlement company or law firm, but their services can be expensive. To maximize your savings, consider trying to negotiate on your own first.

Just keep in mind that debt settlement can be risky. It often involves missing more payments as you work to save up for the settlement amount, and paying less than what you owe can take a heavy toll on your credit score for several years.


If you've considered all other options, consult with a bankruptcy attorney to determine whether filing for bankruptcy relief is the right decision for you. The attorney can also advise you on your options—Chapter 7 or Chapter 13—and guide you through the process.

Note, however, that a bankruptcy can significantly impact your ability to obtain credit. What's more, the public record will remain on your credit reports for up to 10 years—though its impact will diminish over time as you work to rebuild your credit.

Learn more >> How Does Debt Relief Work?

7. Look Into Other Financial Assistance Programs

If your income is low, you may qualify for financial assistance that could help free up money to work on paying down your debt.

Start by checking the eligibility requirements for government assistance programs, such as unemployment benefits, Medicare and food stamps, to see if you qualify. You can also call 211 to see if you qualify for other assistance programs offered by community organizations. Options may include low-cost health care and dental services, housing services, job training and other programs.

The Bottom Line

If you're on a low income, the standard advice of earning more and spending less may be missing the mark. While those are certainly steps you can consider, it's important to understand all of your options, including debt relief and financial assistance programs, to determine which path forward makes the most sense to you.

As you work to pay down your debt, you can check your FICO® Score and Experian credit report for free to understand how your actions affect your score and get insights on how to improve your credit over time.