Getting out of debt can feel overwhelming — especially if you’re broke or living on a low income. When you’re struggling to cover everyday living expenses, finding extra money to pay down debt might seem impossible. Minimum payments barely make a dent, and the cycle of debt just keeps going.
The good news? No matter your financial situation, there are strategic steps you can take to reduce and eventually eliminate your debt. The key is persistence, planning, and making the most of the resources you have. Here’s a step-by-step guide to help you get out of debt, even if your income is limited.
Table of Contents
Key Points
• Creating a budget helps you understand and take control of your finances, essential for debt management.
• Even small changes in spending habits can free up funds for debt repayment.
• Negotiating with lenders can reduce interest rates, making your payments go further.
• Some balance transfer credit cards offer 0% interest temporarily, which can help you pay off debt faster.
• Debt consolidation with a personal loan can simplify payments and lower interest if you can qualify for a lower rate.
Begin by Creating a Budget
The first step to getting out of debt with no money is building a basic budget. While budgeting might sound like a punishment, it’s really a tool for empowerment. It helps you understand where your money is going and gives you a plan to use it more effectively.
Evaluating Income vs. Expenses
Start by gathering the last few months of financial statements, then use them to calculate your average monthly income and average monthly spending. If you find that you tend to spend as much as (or more than) you earn each month, your budget needs adjusting. This could mean reducing expenses, increasing your income, or both.
Tracking Every Dollar
To find places to cut your spending, it helps to list out your typical spending categories and how much you’re spending on each, on average, each month. Another option is to track your spending for a month or two using a budgeting app that automatically tallies and categories your expenses in real time.
Once you see exactly where your money is going, you can identify areas to reduce spending and redirect that money toward your debt.
đź’ˇ Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.
Categorizing Needs vs. Wants
Once you’ve tracked your expenses, you’ll want to separate them into two categories: needs and wants. Needs are essential expenses like rent, groceries, medications, and utilities. Wants are nonessentials like dining out, entertainment, and impulse purchases. Understanding this distinction helps you prioritize spending — and start making cuts in the right places.
Change Your Spending Habits
How you manage your day-to-day spending can make or break your journey out of debt. Small changes add up, and the sooner you adjust your habits, the faster you’ll see progress.
Cut Subscriptions and Reduce Discretionary Spending
An easy way to free up funds is to cut some line items out of your budget completely. For example, you might cancel streaming services you rarely watch or a membership to a gym you seldom use.
Also look for ways to chip away at discretionary spending. For example, you might brew your morning coffee at home rather than buy it at the local coffee bar, cook more meals and eat out less, and pause clothing or hobby shopping unless it’s essential. These changes don’t have to be forever — just until you get your debt under control.
Use Cash or Debit Only
If you’re trying to pay off debt with no money, it’s wise to avoid adding to that debt balance. One way to do that is to switch to paying cash or debit for all purchases. This adds a layer of accountability because you can’t spend more than you currently have in the bank. You can also try the envelope system — using actual cash and envelopes or digitally with an app — to help you stick to spending limits in each category.
Delay Gratification and Set Spending Rules
For nonessential purchases, consider adopting the 24-hour rule: This involves waiting a full day before you buy something you don’t truly need. This delay gives you time to evaluate the purchase, consider whether you really want it and can afford it, and potentially avoid regretful spending. You can also set monthly spending limits for categories like entertainment, eating out, or clothing — and stick to them.
Recommended: How to Avoid Using Savings to Pay Off Debt
Increase Your Income
If cutting expenses still doesn’t leave room for debt repayment, increasing your income becomes critical. Fortunately, there are ways to do this without needing a second full-time job.
Take on a Side Hustle or Gig Work
Today’s gig economy offers a range of opportunities to earn extra cash. Whether it’s walking dogs, babysitting, delivering food or groceries, assembling furniture, or merely standing in line, side hustles are more available than ever before. If you have professional skills — like writing, editing, web development, graphic design, marketing, social media, or tutoring — you might pick up extra income by freelancing.
Any extra earnings can be funneled right into paying down debt.
Sell Unused Items or Assets
Look around your home for things you no longer need, such as clothes, gadgets, furniture, or collectibles. Selling them on platforms like Facebook Marketplace, OfferUp, or eBay can generate quick cash to make an extra payment.
Use Windfalls or Refunds Strategically
If you receive a tax refund, work bonus, rebate, or cash gift, resist the urge to spend it. Instead, put it toward your highest-interest debt to speed up your payoff timeline.
Apply for a Lower Interest Rate
High interest rates can trap you in debt longer. Reducing them makes every dollar you pay go further.
Negotiate With Lenders
Don’t be afraid to call your lenders and ask for a lower interest rate. Be honest about your situation, especially if you’ve been making payments on time. Some creditors are willing to reduce rates or waive fees to help you stay on track.
You might also enlist the help of a nonprofit credit counseling organization. For a small fee, they will negotiate with your creditors on your behalf to lower rates and set up a payment plan you can afford. You then make a monthly payment to the organization and they distribute the payments to your lenders.
Use Balance Transfers
If you have a good credit score, you might qualify for a balance transfer credit card that offers 0% interest for an introductory period. This can give you breathing room to pay down your balance faster. Just make sure you pay it off before the promo period ends — or you could face high interest again.
Consider a Personal Loan
If you’re juggling multiple high-interest debts, consolidating them into a single loan may simplify repayment and reduce your costs — if you qualify for a lower interest rate.
💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.
Pros and Cons of Consolidating Debt With a Loan
Using a personal loan to pay off debt comes with benefits as well as potential drawbacks. Here are some to consider.
Pros
• Potentially lower interest rate: If you qualify for a consolidation loan with a lower interest rate than your current credit cards, you can save money on interest charges over time.
• Simplified payments: Consolidating multiple bills into one makes it easier to manage and keep track of your payments.
• Faster debt repayment: If you’re able to get a loan with a lower interest rate and potentially a shorter repayment period, you may be able to pay off your debt faster.
• Can help you build credit. Paying down your balances lowers your credit utilization ratio (how much of your available credit you are currently using), which is factored into your credit scores. Also, making consistent, on-time payments on the consolidated debt can have a positive impact on your credit profile over time.
Cons
• Short-term credit score impact: Applying for a new loan for consolidation can result in a hard inquiry on your credit report, which can temporarily lower your score.
• Need good credit to qualify for favorable rates: If your credit is fair or poor, you may not qualify for consolidation loans with significantly lower interest rates than you’re paying on your credit cards. This can negate the primary benefit of consolidation.
• Fees and add-on charges: Some debt consolidation loans may involve paying fees, such as origination fees, application fees, and late fees, which can add to your costs.
• Risk of accumulating more debt: If your spending habits don’t change, you might accumulate new debt on the old credit cards once they’re paid off, leading to a worse financial situation than before consolidation.
Use a debt consolidation calculator to estimate whether this strategy could work in your favor.
The Takeaway
Getting out of debt with little to no money is a difficult journey — but it’s entirely possible with focus and the right strategy. Start by understanding your financial situation, cutting unnecessary spending, and creating a practical budget. From there, look for ways to boost your income, lower your interest rates, and be intentional with every financial decision.
Debt freedom generally doesn’t happen overnight. It typically takes small, consistent actions, a willingness to make sacrifices, and a commitment to changing long-term habits. But every step you take can build momentum and help you change your financial situation for the better.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
How do I pay off debt with no savings?
If you have no savings, start by creating a realistic budget and identifying nonessential expenses to cut. Focus on making minimum payments on all debts to avoid penalties, then direct any extra funds to the smallest balance (debt snowball) or highest interest rate (debt avalanche), ticking off debts one by one.
Other helpful steps include increasing income through side gigs or selling unused items and contacting creditors to see if they might lower your interest rate. Progress may be slow at first, but consistency is key.
Can I negotiate my debt if I have no money?
Yes, many creditors are willing to negotiate if you explain your financial hardship. Start by contacting them directly and asking about options like lower interest rates, reduced payments, or temporary forbearance. In some cases, you may be able to settle your debt for less than you owe, though this can impact your credit. Be honest and document all communication. If you’re overwhelmed, consider working with a nonprofit credit counseling agency to help you negotiate and manage your debts.
What’s the fastest way to get out of debt while broke?
When you’re broke, getting out of debt fast means combining aggressive budgeting with creative income strategies. You’ll want to cut unnecessary expenses, pause subscriptions, and track every dollar. At the same time, try to boost income through side gigs, freelance work, or selling unused items. Other key moves include tackling debt one by one and calling your creditors to request lower rates or payment plans. It won’t be easy, but focused effort can create real progress even with limited means.
Should I consider a personal loan if I have no savings?
A personal loan can consolidate high-interest debts and simplify payments, but it’s risky without savings. If you lose income or face an emergency, you might struggle to keep up with the new loan. Before applying, review your credit score and compare interest rates to ensure the loan actually lowers your costs. Consider this option only if you have a stable income and a clear repayment plan. Otherwise, explore budgeting, negotiating with creditors, or credit counseling as safer first steps.
How can I build an emergency fund while paying off debt?
Start small — you might aim for a $500 emergency fund before aggressively tackling debt. To get there, set aside $10 to $25 per week by cutting nonessentials like dining out or unused subscriptions. Automate your savings so it becomes a habit, and use windfalls like tax refunds, cash gifts, or side hustle income to grow your fund faster. Having even a modest cushion prevents you from relying on credit cards during emergencies, which helps you stay on track with debt repayment in the long run.
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