How to Eliminate Personal Debt in 4 Simple Steps

debt • Jun 05, 2025

Personal debt can affect anyone — and for business owners, it can directly impact your ability to secure financing. In many cases, lenders will consider your personal credit when evaluating your business creditworthiness, especially for loans under $250K.

If your credit score is holding you back, whether for personal or business goals, here are four practical steps you can take to reduce debt and strengthen your financial profile.

5 Ways To Instantly Improve Your Credit Score

Step 1: Lower Your Expenses

The average American has just under $6,000 in credit card debt. In many cases, it’s not one big expense, it’s small spending habits that add up over time. Start by writing down all of your monthly expenses and group them into categories.

Look at which category is eating up most of your income and find areas to cut back, at least temporarily. Even small changes (like canceling unused subscriptions or cooking more meals at home) can free up funds to put toward debt.

Step 2: Increase Your Income

If your budget is already tight, or the spending cuts don’t add up to much, your next move is to bring in extra income.

Here are a few ideas:

Pick up extra shifts or overtime if available
Take on a side hustle (freelancing, tutoring, delivery apps, etc.)
Look for remote part-time roles — many companies still hire flexible contract workers
Sell unused items online

Even a few hundred extra dollars a month can accelerate your debt payoff and reduce interest over time.

Step 3: Use A Debt Payoff Strategy

Paying off debt is easier with a clear plan. Here are three tried-and-true methods:

Snowball Method:
Focus on your smallest debt first while making minimum payments on the rest. Once it’s paid off, move to the next. This method provides small wins to keep you motivated.
Avalanche Method:
Focus on the debt with the highest interest rate first. This approach saves you more money over time, though it may take longer to feel progress.
Debt Consolidation:
Consider combining your debts into one personal loan with a lower interest rate and a single monthly payment. (Make sure the terms are favorable and fees are minimal.)

Whichever strategy you choose, stay consistent and use any freed-up income to make extra payments.

Step 4: Rebuild Your Budget

The last step is to re-create your budget and stay consistent with it. It's critical to stay within the confines of your income, especially while paying off debt. Account for all of your expenses and your income and ensure it is balanced. Once your debt is paid off, following an accurate budget is the best way to prevent unnecessary debt in the future.

Final Thoughts: Debt Reduction Takes Consistency

The steps to eliminate debt are simple — but not always easy. They require discipline, consistency, and sometimes short-term sacrifice. But the long-term benefits (less stress, better credit, more funding opportunities) are worth it.