Debt Help Getting Rid of Debt

10 Worst Ways to Pay Off Debt

You’ve had enough! The credit card bills, which are well over $1,000 each month, have gotten out of hand and you’ve finally decided to do something about it. But where do you start?

Not all progress is good progress, especially if you implement a debt-repayment plan that will backfire. And there’s nothing worse than working your rear end off to pay off debt, only to notice that the outstanding balances appear to be at a standstill.

Beyond only making the minimum payment each month, here are some of the worst ways to pay off debt:

1. Raiding your Emergency Fund
If you wipe out your rainy day fund to eliminate debt, what will you do the next time financial emergency arises? In most instances, you’ll rely on that same credit card you just paid off to remedy the issue. A better option: instead of touching your emergency fund, ax unnecessary expenses and use these proceeds and any other financial windfalls to accelerate debt-repayment efforts.

2. Credit Card Cash Advances
Thinking you can avoid interest by taking out a cash advance to wipe out your outstanding balance? Think again! Not only will you be hit with a cash advance fee, but an exorbitant APR may also apply. And don’t expect a grace period, either.

3. Payday Loans
If you have less than perfect credit and your finances are in dire straits, you may be considering a payday loan. And why wouldn’t you? There’s no credit check and the cash could be in your hand or bank account in less than 24 hours. Plus, you can extend the due date if you can’t afford to repay the loan balance on time. All you need is a verifiable source of income, bank account and you’re all set. That’s the pitch payday lenders love to give desperate, cash-strapped and vulnerable consumers, but what they don’t brag about is the exorbitant interest rates that accompany these loans. So, if a payday loan is the only way to pay down debt, call the creditor directly and request payment arrangements, instead.

4. Robbing Peter to Pay Paul
Why not shuffle your debt around to eliminate the balances faster? Debt is debt, no matter where you put it. And this approach only works if shift all your debt to a balance transfer credit card and can actually afford to eliminate the balance before the promotional APR expires. It’s dangerous to skip payments on some cards in order to pay more on others since doing so will tarnish your credit rating and land you in the hot seat with your creditors.

5. Title Loans
Do you happen to have a few cars with titles lingering around in the front yard? Why not take out a title loan to wipe out debt? Do so at your own risk, but don’t be surprised when you default on the loan and the repo man shows up. Also, be prepared for the hefty loan origination fees and interest rates that come with the territory.

6. Personal Loans
Unless the interest rate you’re being offered is lower than what you’re currently paying, steer clear of personal loans. And should you decide to go this route, stash your credit cards and forget about them so you won’t end up with even more debt than you started with.

7. Hire a Debt Settlement Firm
If you don’t mind your credit score plummeting so far into the toilet that it’s practically impossible to improve for years to come, debt settlement may be for you. Reasoning: they may encourage you stop making payments on your debts, which could have serious implications for your credit. Plus, you’ll be paying hefty fees you’ll be paying for their services although there are no guarantees that the creditors will accept the offers they propose.

8. Home Equity Loan or Line Of Credit
If you have equity in your home, all you have to do is access the funds through a loan or line of credit. Sounds simple, but it’s a bit more complex than that. In essence, you’ll be increasing your monthly mortgage payment to pay back the amount you borrowed. And if you default on the loan, guess what? Down goes your credit score if a payment arrangement is not made and the unpaid balance is sent to collections. Also, keep in mind that the lender could exercise the right to foreclose on your home.

9. Loans from Family and Friends
Do you have a wealthy relative or childhood friend who has money trees growing in their backyard? They may be willing to loan you the funds to get out of debt, but you’d better be prepared to pay them back in a timely manner or down the drain goes that relationship. And chances are you won’t be able to rely on them again if you get into a serious bind.

10. Retirement Fund Withdrawals
Are you considering a withdrawal from your retirement fund? While it’s a fast way to access cash so you can be in the clear again, it’s also a costly move. But why? For starters, premature distributions are subject to taxation and a 10 percent early withdrawal penalty imposed by Uncle Sam, himself. Furthermore, you’ll be missing out on the benefits derived from compounding interest and possibly putting your financial future at risk for a short-term benefit.

And a retirement loan isn’t necessarily a viable option either since you’ll have to pay an origination fee. Even worse, if you jump ship and can’t afford to pay the loan back, it instantly turns into a distribution and the consequences mentioned above will follow suit.

Kudos to you for making the commitment to get out debt, but remember there’s no one-size-fit-all approach to get there. So, do what’s best for your financial situation and proceed with caution to make your efforts worthwhile.

Have you made any of these debt repayment mistakes? Share your story in the comments so that others don’t fall into the same trap!

About the author

Allison Martin

Allison Martin is a digital content strategist and personal finance junkie. Her work has appeared on on a number of reputable sites, including The Wall Street Journal, Investopedia, Daily Finance, MSN Money and She also travels around the nation facilitating financial literacy workshops for nonprofits, governmental organizations, colleges and universities.


    • hmm. Here’s how I would write it:
      1. Hide the credit cards. You can’t pay them off fast if you keep using them.
      2. Take a look at the bill. Going ‘paperless’ is no excuse, log in to your account and find the digital copy of the bill. It will tell you how much interest you are paying on that debt and how long it takes to pay off at minimum payments. Those are both very important pieces of information to have and it could be a bit of an eye opener.
      3. Make sure you know the difference between transactions, balance, and interest. Transactions are when you actually use the card and that creates a balance debt. Interest is charged based on that balance. Even when you stop making transactions, the interest changes the balance as well.
      4. The only real way to eliminate debt faster is to pay it faster. That usually requires either having a strong income or significantly low expenses. Since most of us can’t instantly get raises I suggest taking a look at your expenses.
      5A. Do you get more satisfaction from several little successes versus one big success? Paying down the smallest balance card first will motivate you more in that case. You’ll see one card have a zero balance and that small success will inspire you to do it again.
      4B. Would you rather have one big success than lots of little ones? Paying down the card that has the highest interest rate first would be better for you. You are of the mindset that interest is ‘throwing away money’ and paying down the highest interest card will throw away less of it, thus ensuring you will have a bigger success when you reach your goal.
      5. Always pay more than the minimum payment. Minimum payments include interest owed and that majority of it is actually the interest. It takes forever to pay off your balance because most of the money never goes to the balance owed, it mostly goes to interest owed. I would strongly suggest paying at least the minimum plus whatever interest has been charged the previous month. That way some of the money is for sure going to the balance owed and paying the debt off.
      5. Always make at least the minimum payments on each card on time! Most cards carry a ‘default APR’ which is fancy talk for “if you pay late, we increase the interest significantly.” It is extremely difficult to get out of the jam it creates when the interest owed doubles overnight.
      6. Most utility bills will let you pay them late without a ding to your credit score. (at least with today’s scoring models. Credit scores do not include utilities but there is talk of changing this.) This means that if you absolutely must juggle money around to pay your bills, juggle the utility money toward the minimum payment on your card. You’ll owe a late fee on the utility bill so don’t do it if you don’t absolutely have to juggle bills.
      7. Are you in dire straits? When life gives you lemons you are supposed to make lemonade but sometimes even that is too expensive. Plasma donations are usually good for 20 dollars and you can do it 2 times a week. 40 dollars should cover a minimum payment or maybe just buy gas for your new uber/lyft/doordash job. The pay isn’t the greatest but the neat part is that your earnings can be be cashed out in less than 24 hours. Some temp agencies pay you immediately after you complete the day’s work. That’s a real big help if you are trying to pay bills due within days. Yes it’s all grunt work, it’s all not fun. Take the 60-100 dollars or so per day, get yourself out of dire straits, maybe then look for a weekly or monthly pay job that pays better and then focus on fun.

      For the record, yes I was in dire straits. I did Uber Eats and I stayed taking deliveries every day until I earned enough money to pay the bill that was due the next day. Sometimes it took all day (24 hours) to earn that money but I cashed out my earnings and paid my bills on time. It took two weeks before I caught up to where I could pay the bills with money that was not last minute. It can happen this way. I then focused on getting a better job and now that I have it, I currently pay 100 dollars plus interest for each of my 4 cards. I estimate I will be debt free on May 1st. Yes it can be done.

    • Jessica,
      I’ll pass this along to our writers! Look for an article on how to eliminate debt faster in the coming weeks.


  • Check a consumer catalogue and many problems can be helped by a good debt management program.That was what I used to get out of debt.Mak sure it is a legitimate program and also you want be able to use your credit cards for a lengthy period of time.I was over $45,000.00 in debt when I enrolled in this program.Please make sure that you keep up your stated payments andyou will be relieved of thi credit card burden.Be blessed.

  • I refinance my mortgage and with the extra money, they gave me I pay all my debts after buying down on most of them. I managed to stay debt free for a while but then, because of the mortgage refinancing, my home is in foreclosure. Had a car problem, got a credit to fix the car, and back in troubles again. because of the foreclosure, which still not done after 4 yrs, I got a payday loan to help me with my bill payments and rent every now and then. Finally, I got a better job, but I still behind of some debts and don’t know how to fix it.

  • Ok so I got behind on my cards was able to pay off all of the cards except for one I traded my 2014 truck for a 2017 SUV that did move my score a 40 point dealership said 40-50 I was duo but my score keeps dropping I’ve gone through 2 credit disputing companies who didn’t do much of anything at all except take me money from me I need help fixing my credit but I’m out of money any real true free advice and if it’s get a secured card remember I’m broke now thanks

  • Great article on what not to do. I have done all of them except the title loan and I’m still in debt. So that leads to my question: is there going to be a sequel to this on what one should do?

  • Unfortunately, I fell victim to 8 of the 11 (if you count only paying the minimum).
    4 years ago my credit score was 810, yep that’s correct, 810.
    Then I met this great guy, fell in love, got engaged and that’s when the downfall started. I fell victim to his trap, he had me where he wanted me… looking toward our future together. So we’re engaged and I’m thinking “I need to start looking at how we can build our future together, make more money, save money, etc.”
    You can see where I’m going with this….
    In the long run none of the things I was trying to do benefited me at all. He had an agenda, take me for whatever he could get and then get out, of course taking everything with him. So I was left with all the bills and he helped pay them for a couple months then decided that he didn’t owe me anything.
    So now I am in the process of filing for bankruptcy. I have looked at all the options, talked to so many people and even though I hate the idea, filing bankruptcy is the best option for me.
    So my advice would be; make sure you know what you’re getting in to; don’t change the way that you are doing things to help anyone else (YES, even if it is your significant other); listen to your gut (and the little guy on your shoulder); stay strong in your position (if they really love you, they won’t push the issue).
    Thanks for taking the time to read this…. I hope that it will help someone out there!!
    P.S. Since leaving me he has had everything that I helped him obtain repossessed. And guess what…. It’s my fault!! Ha…. I believe it’s Karma!!

    • How did you cause his items he bought with your money to be repossessed ? After all he got your money out of the credit cards and spent it, How would you have any control over any more money he still owed on the items he bought ? Strangely enough, I as a 70 year old man, had a woman about 55 literally pick me up in the waiting room of my primary care Doctor’s office about ten months ago, It only took about three to four weeks to find out she was a con woman ! I told here on the first day, My finances were extremely limited but she said no problem she would pay for everything then over the next couple weeks she took me out to dinner twice and even a movie, But then came the immediate emergency loans she needed for $300 to replace her cell phone and $5,000 to pay off the rest of an $80,000 very specialized sewing machine she claimed she used in her business to make wedding dresses. She got nothing out of me, I told her I had just enough income to pay my basic living expenses and no more, Which was true. I assume her taking me out to places was to get me to feel indebted to her ? But I wasn’t born yesterday, We all need to be careful in these areas of the Heart (If it even gets to that point ?) Watch out for Gina ! She was / maybe still is here in Miami, Fl. !

  • Great article I’ve done a few of these but worked out in the end. Debt consolidation be careful there are bad sharks out there and most take their payment 1st. I was lucky and found an exception that got paid after the creditor on commission but the IRS fees are no joke every dime u save is taxable. My credit score bounced back quickly surprised some people but I learned during 2 years existing cards cut limits almost to zero do don’t plan on having credit for a

    401k loans need to be paid back within weeks if you change ir lose your job or it’s an early withdrawal with penalties what a cruel IRS joke.

  • Allison, thank you for a very informative article. Unfortunately, it comes about four years too late for me. I was so tired and fed up not seeing my credit card balance drop that I was willing to do anything to pay it off.
    I thought debit settlement was a good idea because you pay back only a negotiated amount. On paper it seemed like a good idea, but in practice it is horrible. It takes six months of no payments before the lender will talk to you. Even then, it takes several offers before they will agree. I then got to thinking, how can I pay a lump sum amount when I don’t have the money? This led me to my next mistake.
    I chose to pay everything off with my retirement fund. The idea was, once I was debit free, I could quickly build it back up again. That has not happened. First, I made the big mistake of not having taxes taken out. That coupled with the fact that any money forgiven becomes taxable income. Second, I’m still in debit because I had no emergency fund, or rather every month I had an “emergency” so it was impossible to build it up. So, I pulled out the credit cards and did it all over again.
    Whatever I thought I might have gained was lost in taxes and penalties as well as the handsome fee to the company that handled the negotiations.
    The good news is there is a happy side to all of this. I have been working hard to do it the right way. Make payments on time, pay more than the minimum due and stop using the cards. It’s been tough but I finally realized there is no quick fix for eliminating debit. It is quick to dig a hole, but it takes a long time to climb back out, and rebuild your credit score.

  • If you pay off a credit card completely and don’t use it, will it affect your credit score? Or is it a good idea to cancel those cards? Does this also affect your credit score? Thanks.

    • I’ve paid off everything, no errors on my credit report. How long does it before my credit score goes up?

    • Keep the card, Pay off as much as possible, If you get it down to $0.00 then only make one small purchase every month or two and pay it off each month, so the card is not cancelled for lack of use and continues to report low balance percentage and on time payments which both are very important for a good credit score.

  • I am about to take a loan from my 401k to pay off my car it is the biggerst bill i have. I think it is a good idea. as I will repay the loan quarterly.

    • This will work unless you get laid off or change jobs. Then you have to pay the loan in full or it becomes a distribution with taxes due and 10% penalty for early distribution.

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