How to Pay off Loans and Get Out of Credit Card Debt

Updated on May 30, 2020
viking305 profile image

L.M. Reid is an Irish writer who has published many articles in magazines and online.

How to get rid of Credit Card debt
How to get rid of Credit Card debt | Source

How to Get Rid of Credit Card Debt

Are you having trouble getting out of debt? If your loan repayments have gotten out of control and you are stressed out by debt collectors and legal letters then follow this step-by-step guide. I'll show you how to write a financial plan to get out of debt, how to manage your repayments to the credit card and loan companies. This can be achieved even if you are on a low income.

Money Problems

Do not ignore your debts. They will not go away. It saps your positive energy because when you think about money it is only with worry and stress. As the debts mount up so does the interest and late payment charges, then your debts become out of control. It becomes impossible for you to meet the agreed repayments and you are in financial trouble. It will get to the stage where you will be afraid to open the letters, answer the phone or even go outside your front door because of the debt collectors.

Take control of your debts by facing up to your financial difficulties and take control of your life. Every country is different in the way they deal with people who have found themselves with these money problems. But as a universal rule, if you ignore your money problems they will only get worse.

Unpaid Loans

Existing unpaid loans will get bigger with more interest added. This only causes more stress to you and affects your health. If you are brought to court the expense of this will be added to your debt. In most countries, the court will look at your financial situation. If it sees you are genuinely in financial difficulty, it will order you to repay a manageable amount each month. But beware if you fail in this order for any reason then you will be jailed for contempt of court. The credit card debt will still be there when you are released.

So What Can You Do?

Make a list of everything you owe. Include all the credit cards, loans and other financial institutions you owe money to. By taking this first step you have made a decision to accept responsibility for your debts. You can now face up to the reality of the situation. Write down exactly how much you owe to each.

Add it all up. Yes, it will be a shock, but this is the first step in taking back control of your life. I now want you to work out how much it costs you a month to service these loans. Look at the high-interest charges and see how much it is costing you. Or if you have gotten to the stage that you can not even pay the interest, look how much extra this is putting on top of that debt every week.

How Much Money Do You Owe?

You now know exactly how much money you owe. That is the first step. You have accepted you need to take control of the situation. Make a list of all your monthly expenses. These will be the necessary ones to enable you to survive.

Monthly Rent or Mortgage

If you are in danger of losing your home, you must contact your mortgage broker immediately and try to come to a workable arrangement. The banks can be reasonable and can come to an agreement of either a three-month gap or a twelve-month interest only repayment.

This applies to a rental property too, do not let the rent go unpaid. Contact the landlord and try to come up with a repayment plan for the arrears. Your next priority is your monthly food and utility bills. If you have children also include any necessary expenses they incur on this list.

Monthly Income

Write down everything that comes into the household starting with wages from anyone working. If unemployed add your social security payments and any vouchers. If you earn money from any part-time business and it is guaranteed then include this too. If you are not sure how much income can be earned every month then leave this out. You need to know exactly how much money you can commit to repayments

Your Loans

Most people will get a shock when they read these figures. Now you have four columns.

  1. What money you owe.
  2. How much you should be paying back a month.
  3. What money you need to survive on for the month
  4. What money you have available to you monthly.

Take the amount of money you have for your monthly expenses away from the amount of money you have coming into the house. What you have left is what you can afford to pay back to your creditors. Most people in a lot of debt are going to see an enormous difference in these two figures.

Here's an Example.

You owe $70,000. Your monthly debt repayments come to $2,370. Your monthly income comes to $3,000. Your monthly expenses come to $2,000. You only have $1,000 a month to meet a commitment of $2,370 a month.

Pay Back What You Can

Go back to your list of all the financial institutions you owe money to. Put the highest amount of money you owe on the top of the list and work down. We will work from the example above. You know you can only afford to repay $1000 a month so work off that figure. Decide how much you are going to offer each creditor.

Debt Amount
Original Repayment
Proposed New Repayment
A $25,000
B $18,000
C $12,000
D $9,000
E $3,700
F $2,300

Phone Your Creditors

Now you phone the first creditor on your list and explain the situation. Ask them to agree to the lower payments. If it is a credit card company also ask them would they consider stopping the interest and late and missed payment charges.

You are guaranteed that the person on the other end of the phone is going to try to persuade you to increase your offer a little. Stay firm but polite and tell them if they accept your lower payment offer they are at least guaranteed that amount because you know you can afford it.

Statement of Means Form

Work down the list. You may get someone who is rude and does not want to negotiate. There is not much you can do about that. Most will ask you to fill in a Statement of Means form and give proof of your earnings or Social Welfare benefits.

Most will allow you to email this to them and some will ask you to post it. Once you have contacted everyone on your list, make sure you keep a copy of what was agreed for each one. Most creditors are glad to get some payment from you. Once they see you are genuinely unable to repay the debt as previously agreed they will accept the new arrangement.

Steps To Get Out Of Debt

Brought to Court

If a creditor brings you to court, it is up to the Judge to decide how much you are capable of repaying. Once you have been honest it will usually be a smaller amount than you offered. Creditors are aware of this and only bring people to court who they know will not pay back the debt as opposed to those who are unable to make the repayments.

It is not nice having to go to court. But sometimes this is necessary because one of your creditors has been unreasonable. You will get through it. You have nothing to fear. Yes, you are responsible for the debt, but you have accepted this and have offered an amount of money that is reasonable in your current situation. Once you are honest the Judge will see this.

Paying off Your Debts

The debt is still there but you have taken control of it by negotiating lower payments on your reduced income. You no longer have this dread every day you wake up and remember all the repayments that are due that you know you can not meet. You can finally clear your mind of the negative energy that has been surrounding you every day as you thought of money.

You have your life under control and now it is time to change the energy around your thoughts of money to a positive frequency. This will have the effect of attracting money into your life. The official government website links from a few countries that will give you advice on the best way of paying off debts are here on this page.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

  • What are the best options to pay off credit card debt?

    Everyone has a unique solution. The best way to take control of your credit card debt is to contact each credit card company. Explain your financial difficulty and come to a repayment arrangement that you can afford.

  • My late husband had taken out an interest-only loan with Bank of America. When the term ran out and it became due in full he had passed away leaving no insurance. The bank converted the loan to a home improvement type. I can not afford the monthly payment. They refuse to negotiate! Due to my credit score. What can I due to avoid defaulting on my loan?

    If you find yourself with debts you can not repay then you need to get some advice on how to tackle the situation. If you live in America then click on this website to arrange to see a free counselor anywhere in the US.


    0 of 8192 characters used
    Post Comment
    • viking305 profile imageAUTHOR

      L M Reid 

      2 years ago from Ireland

      Hello Amy, yes once you stop ignoring mounting debt then it can be beaten. I agree with you about knowing exactly how much money is needed each month to pay the bills. This will give people the insentive to cut down too.

    • Happymommy2520 profile image


      2 years ago from East Coast

      Great hub. I agree with you, you have to face what you make and how much you owe. It's better to tackle the problem and work on it everyday. Before you know it, it will get better! It is also wise to write down all of your bills each month and think of creative ways to make them lower.

    • viking305 profile imageAUTHOR

      L M Reid 

      8 years ago from Ireland

      Worrying about lack of money and debt collectors is an awful thing to have to live with. It is good to know that there are Government agencies out there that can help with advice about dealing with aggressive legal letters and threats of court action.

    • profile image

      Robert Pena 

      8 years ago

      Another thing I have noticed is the fact that for many people, below-average credit is the reaction to circumstances further than their control. For example they may have already been saddled by having an illness so they really have high bills for collections. It can be due to an occupation loss or maybe the inability to work. Sometimes divorce proceedings can really send the finances in an opposite direction. Many thanks for sharing your opinions on this blog site.

    • Millionaire Tips profile image

      Shasta Matova 

      8 years ago from USA

      Lots of great information - I don't have any experience with dealing with the courts about debt, and it is good to know.

    • viking305 profile imageAUTHOR

      L M Reid 

      8 years ago from Ireland

      Thank you every one for reading and your comments.

      Charlie I am sorry to hear your mother is in overwhelming debt. It depends what country you are in but I know quite a good many places have a free debt advice agency. The people there will be able to talk to the banks etc that are looking for payments.

      If this service is not available in your country then do not ignore the letters and phone calls. The best thing to do is to talk to the people who your mother owes the money to. Usually when you explain that there is no way that the agreed payments can be met the company will accept a smaller repayment rather than going to the trouble and expense of going to court.

      I hope you can sort something out soon

    • profile image


      8 years ago

      my mom suffers from debt,,how can we cope up ? she cant sleep?

    • profile image

      c c 

      8 years ago

      Very useful. Thank u for posting this. Your information really helped me

    • profile image

      "Miami Real Estate Attorney 

      9 years ago

      Thank you for nice information, I like your guide. keep up the good work continue.

    • eculligan profile image


      9 years ago

      Very good information. Thankyou

    • viking305 profile imageAUTHOR

      L M Reid 

      9 years ago from Ireland

      Thank you Noel and Jeff for your comments I appreciate it.

    • prasetio30 profile image


      10 years ago from malang-indonesia

      Another great hub from you. I am glad to follow your tips. Thanks for share about this for us.

    • profile image

      Jeff Ragan 

      10 years ago

      Imagine being free of debt -- no more sleepless nights over mounting credit card balances, no more ball-and-chain of debt feeding your anxieties, and no chance of threats from dreaded collection agencies. You can do it! Here's the scoop -- in one minute flat.

      0:60 Resolve to spend less than you make

      Make it a habit as fundamental as stopping for red lights. Realize once and for all that if you can't pay for it today -- you can't afford it.

      0:55 Distinguish between Bad Debt and OK Debt

      OK Debt has an interest rate well under 10% -- preferably with some tax advantages to boot. In the best case, what you bought with borrowed funds will appreciate in value. Home mortgages and student loans are examples of OK Debt. Automobile loans are on the border: They often satisfy the low-rate piece, but automobiles almost never appreciate in value. Bad Debt is everything else -- from your titanium credit card to the 35% loan from Larry's Kwik Kash.

      0:50 Pick a winner

      Out of all your cards, pick the one or two major credit cards that feature the lowest annual interest rate. Resolve to use those cards for emergencies only. As for all the other plastic pals in your wallet, remove temptation by taking them out of your wallet. Throw them behind a major appliance, freeze them in a bowl of water, or decoupage them to a shoebox. Do whatever it takes not to use them.

      0:41 Gather the latest bills from all Bad Debt accounts

      Line these up on the kitchen table. Find the minimum monthly payment for each account and then add these up to get an overall monthly minimum. Pledge to pay this overall minimum PLUS a hefty additional chunk every month -- enough to make a solid dent in the outstanding balance of at least one account.

      If you can't pull this off, you'll have to make a drastic move to increase your income or lower your expenses. It's harsh, we know, but it's also an inescapable fact.

      0:34 Pick the highest interest rate account and: Attack!

      Next, order the latest bills according to annual interest rate charged. Apply the "hefty additional chunk" (beyond the minimum) to the highest rate account(s). Repeat this process monthly until the last Bad Debt account is paid in full.

      0:26 Ask for a lower interest rate

      Grab a bill from any account charging you more than 14% interest. Dial the toll-free number on the bill and ask to have your rate reduced -- say, to 11%. Tell them that you'd really like to stay with them out of customer loyalty (embellish according to your acting skills), but that you have received offers for much-lower-rate cards. Expect to be made very uncomfortable, but stand firm and remember that, to them, you are both a customer and a profit center. You also stand to save a bundle. The more calls you make, the more persuasive you'll become.

      0:18 Be prudent

      Be aggressive in paying down Bad Debt, but don't get so ambitious that you risk missing minimum payments on your mortgage, automobile, or any other secured credit account. (Secured means that if you miss enough payments, the bank can show up and take away your stuff.)

      0:12 Commiserate with others

      On our Consumer Credit / Credit Cards discussion board, you'll find plenty of emotional support and great ideas. Help others celebrate their debt-free "happy dance."

      0:05 Dance, Fool!

      You're done when the Bad Debt is 100% exorcised and you can make remaining OK Debt payments with ease, leaving plenty of budget room for savings.

    • Nemingha profile image


      10 years ago

      Nice detailed information, thanks!

    • viking305 profile imageAUTHOR

      L M Reid 

      10 years ago from Ireland

      Thanks for reading and the comment Property-Invest

    • Property-Invest profile image


      10 years ago from London

      Great hub and excellent advice!

    • viking305 profile imageAUTHOR

      L M Reid 

      10 years ago from Ireland

      Thanks for reading ratelines. Yes the videos are good at explaining the ins and outs of American Law in relation to debts and loans

    • ratelines profile image


      10 years ago

      Suzy fan here, good videos!

    • viking305 profile imageAUTHOR

      L M Reid 

      10 years ago from Ireland

      Thanks jennifer for your comment, Yes unfortunatley when people are in a lot of debt sometimes it is very hard to be able to take the next step on the road to recovery. The stress that the whole situation causes to the family is terrible. And the bullying tactics of some of the debt collecters can be enormous.

    • viking305 profile imageAUTHOR

      L M Reid 

      10 years ago from Ireland

      Yes Bj unfortunetly that seems to be the way for us all. But at least you can be free of those particular debts once they are paid off.

    • Jennifer profile image


      10 years ago

      This is a great hub and well thought out. Good advice!

    • BJBenson profile image


      10 years ago from USA

      My husband will be getting two pay checks for 2 months. Guess we plan to do. Pay of debt.

      wonderful hub.

    • viking305 profile imageAUTHOR

      L M Reid 

      10 years ago from Ireland

      Thanks for reading Garli Angel. Indeed it is, but at least by contacting all the loan companies and coming to an arrangement some of that stress is gone.

    • Garlic Angel profile image


      10 years ago from Dublin

      Excellent advice viking.. yes it can be very stressful when you have debts mounting and like you say worrying about them does not help...

      I also enjoyed your videos at the end...

      Thanks again viking for a great hub and I look forward to more... Garlic Angel :-)

    • viking305 profile imageAUTHOR

      L M Reid 

      10 years ago from Ireland

      Your welcome and thanks for reading. I have only just published this hub and I am in the process of adding links for Government advice and help from each of the main countries from the majority of my readers.

    • jobister profile image


      10 years ago from Anaheim, California

      Very good hub! thanks for the detailed info.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)