Follow These 5 Steps to Become Debt-Free in 5 Years

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With the notion of the American dream always looming, it’s easy to fall into debt trying to attain it.

That’s why it’s not shocking that Americans have more than a trillion dollars in credit card debt and auto loan debt and nearly $15 trillion in mortgage debt. More than 44 million people have student loan debt.

Getting out of debt is usually more complicated than getting into debt. And it feels like it takes forever.

The standard student loan repayment plan is 10 years. It’s about the same timeline if you have $15,000 in credit card debt with a 17.00% interest rate and pay $260 a month.

But who doesn’t want to get out of debt faster? That’s why we tapped several financial experts to find out their top tips for becoming debt-free (or close to it) in five years. Here’s what they had to say.

1. Negotiate with debt collectors

No matter what type of debt you have, chatting with the companies that you owe money is a great way to start lowering that amount.

“Many credit card companies will be willing to put you on a five-year fixed-rate plan if you request it,” said Ash Exantus, director of financial education and financial empowerment coach at BankMobile. “This is a great option because it allows you to know exactly what you need to pay on a monthly basis with no surprises.”

The same can be done for student loans. If you have federal loans, you have a choice of repayment plans that suit your financial situation, including income-based ones.

With medical bills, you can try negotiating with the doctor or hospital about your bills. Even if it’s a utility bill, talk to the company to see what can be worked out. You could knock hundreds to thousands off what you owe.

But there are some caveats to consider. Most credit card companies will request that you close your card to get the five-year plan, according to Exantus, which might have a negative impact on your credit score.

Certified public accountant (CPA) Michael Eisenberg, a member of AICPA’s National CPA Financial Literacy Commission, warned that forgiven debt could be subject to income taxes just like your paycheck because it’s considered income. So, it might make sense to talk with a CPA.

2. Consolidate your debt

Besides talking to the companies to which you owe money, you should consider debt consolidation.

Getting a debt consolidation loan can be helpful if you have accounts with high interest rates,” said Sean Fox, debt expert and co-president of Freedom Debt Relief. “These loans, available from independent lenders, often have lower rates than credit cards along with a strict payment schedule that keeps people on schedule for paying off the debt.”

Consolidating high-interest debt into one monthly payment with a lower interest rate can save you money in both the short and long run. You could wind up paying less every month, and you’ll pay less in interest.

For example, if you have $10,000 in credit card debt at a 15.00% interest rate and are making monthly payments of $220, it would take you five years and seven months to pay off the debt.

By consolidating that debt into a personal loan with a 10.00% interest rate, you would pay off that amount seven months faster, pay only $212 a month, and save nearly $2,000 total in interest.

3. Adjust your budget

The next step after seeing if you can lower your debt upfront is to rework your budget. This will help you determine where you’re overspending, where you can cut back, and how much more money you can put toward aggressively paying off that debt in five years.

“Dig deep into the various lines on your budget and look for ways to reduce expenses,” said financial blogger David Bakke. “You can use an online resource such as Mint, an Excel spreadsheet, or even pen and paper to get an idea of where your money goes each month.”

Figure out your fixed costs (mortgage, rent, utilities, etc.) and where to reduce your spending as part of your debt-reduction plan.

“Believe it or not, there are plenty of ways to save on things like utility bills and gas for your car and even subjective spending categories like entertainment,” said Bakke.

Here are some budget areas to reconsider:

  • Subscriptions and memberships: Netflix, newspapers, gym, etc. Take a look at what you pay for monthly in those areas and cancel them for easy savings.

  • Cable: If you’re paying $100, $200, or more for your cable or satellite TV service but you’re getting most of your content on the web, consider releasing yourself from the monthly charges that you might have signed up for years ago.

  • Credit card and bank fees: If you’re paying fees (look at your statement), shop around for no-fee credit cards and checking accounts.

  • Insurance: Look for lower rates on similar coverage for your home and car.

Once you’ve cut out all the necessary fat, you should have a monthly surplus in your bank account.

From there, build your road map. “Come up with a specific set of goals for paying off your debt, such as $200 every month or $3,000 per year,” said Bakke. “That surplus should be sent into your debt each month.”

Also, dedicate all your extra income toward your debt. This includes bonuses, raises, tax returns, wedding gifts — you name it. Use the extra income to attack your debt.

4. Choose a pay-down method

You’ve negotiated your debt, consolidated your remaining debt, and come up with a budget. Now you need to choose how you’re going to pay off that debt.

“Make an honest assessment of whether you can pay down credit card and other debt on your own,” said Fox. “Set an amount each month that you can allocate to paying the debt. This should be more than the combined minimum payments on all credit cards.”

He suggested choosing between two methods for debt payoff:

  • Debt avalanche: Make minimum payments on each debt besides the one with the highest interest rate. For that debt, pay the minimum plus any more that you can. Repeat this process every month until that debt with the highest rate is paid off. Then, keep going with the same monthly total amount. But allocate the money you used to pay off the highest-interest debt toward the debt with the second-highest rate. Keep following this program until all debt is paid off.
  • Debt snowball: Pay the minimum on all debt. Then, apply the remaining money from the monthly total you’ve allocated to the debt with the smallest balance. After that debt is paid off, continue paying the minimum on all debt and putting the remaining funds to the second-smallest debt. Many people are more successful with this method because of the satisfaction they get by eliminating an entire debt, one at a time.

5. Take on a side hustle

We have many success stories on our website of people revealing how they were able to tackle hundreds of thousands of dollars of debt in a handful of years. And a common theme among them was taking on a side hustle.

Grant Sabatier not only paid off $30,000 in debt in five years but also became a millionaire by taking on multiple side gigs besides his full-time job.

Kevin Han, creator of personal finance blog Financial Panther, tried nearly every side hustle available to pay off his $87,000 in student debt in under three years.

“Why shouldn’t I still find ways to make extra money?” he previously told us of why he works many side hustles while still being a full-time lawyer. “It only helps with future financial goals.” That financial goal could be paying off your debt.

Do everything you can to earn extra money. Driving for Uber, selling unwanted items on eBay, or delivering pizza are great ways to get extra cash to put toward that debt.

Get out of debt fast

Depending on how much debt you have, it can take time to pay it all off. But all these experts agree that if you take certain steps to work toward a debt-free goal, you can reduce that period significantly.

Five years is doable, but even if it’s a few more years, these tips will get you on the right path. If you still feel lost or are facing bankruptcy, consider hiring a credit counselor to help come up with a plan or look into a debt settlement company.

Once you’re debt-free, be careful not to go back into debt. Take time to think about your purchases and spending habits. Understand that no matter what method you choose, it will require change.

Interested in a personal loan?

Here are the top personal loan lenders of 2019!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.990% APR to 16.990% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.72% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.79% – 20.89% (6.79% – 20.89% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.

7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

5.74% – 16.99%1$5,000 - $100,000

Visit SoFi

7.54% – 35.99%$1,000 - $50,000

Visit Upstart

7.99% – 35.89%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

5.99% – 29.99%3$7,500 - $40,000

Visit FreedomPlus

6.79% – 20.89%4$5,000 - $50,000

Visit Citizens

9.99% – 35.99%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

Visit LendingClub

6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.