If you're feeling overwhelmed by debt, you're not alone. Millions of Australians are juggling credit cards, personal loans, buy now pay later accounts, and other financial obligations. The good news? Getting out of debt is absolutely achievable - and 2026 could be your year to take back control.
In this comprehensive guide, we'll walk you through proven strategies, practical steps, and expert tips to help you become debt-free. Whether you owe $5,000 or $50,000, these principles work.
Know Exactly What You Owe
Before you can tackle your debt, you need to know exactly what you're dealing with. Many people avoid looking at the full picture because it feels overwhelming - but this step is crucial.
Make a list of every debt you have:
- Credit cards
- Personal loans
- Car loans
- Buy now pay later (Afterpay, Zip, etc.)
- Unpaid bills and fines
- Money owed to family or friends
- Any other financial obligations
For each debt, write down:
| Information | Why It Matters |
|---|---|
| Total amount owed | Shows the full picture |
| Interest rate | Helps prioritise which to pay first |
| Minimum payment | Your baseline monthly commitment |
| Due date | Avoid late fees and credit score damage |
Yes, the total might be scary. But knowing your number is empowering - it transforms a vague anxiety into a concrete problem you can solve.
Create a Realistic Budget
A budget isn't about restriction - it's about giving every dollar a purpose. You need to know exactly how much money you have available to put towards debt each month.
Start with your income, then subtract:
- Essential expenses (rent/mortgage, utilities, groceries, transport)
- Minimum debt payments
- Small amount for unexpected costs
What's left is your debt attack fund - the extra money you'll throw at your debts each month to pay them off faster.
Choose Your Debt Repayment Strategy
There are three proven methods for paying off debt. The best one is whichever you can stick with consistently.
The Debt Avalanche Method
Pay minimum payments on all debts, then put every extra dollar towards the debt with the highest interest rate.
- Mathematically optimal - saves the most money on interest
- Best for: People motivated by numbers and long-term savings
The Debt Snowball Method
Pay minimum payments on all debts, then put every extra dollar towards the debt with the smallest balance.
- Quick wins build momentum and motivation
- Best for: People who need regular victories to stay motivated
The Feel Good Method
Prioritise the debt causing you the most stress - whether that's money owed to family, a debt collector calling, or just one that keeps you up at night.
- Reduces emotional burden and relationship strain
- Best for: People whose debt is affecting their mental health or relationships
| Method | Focus | Best For |
|---|---|---|
| Avalanche | Highest interest rate | Saving the most money |
| Snowball | Smallest balance | Building momentum |
| Feel Good | Most stressful debt | Reducing anxiety |
Reduce Your Interest Rates
High interest rates are the enemy of debt freedom. Every dollar going to interest is a dollar not reducing your balance. Here's how to fight back:
Call and Negotiate
Call your credit card company or lender and simply ask for a lower rate. You'd be surprised how often this works, especially if you've been a good customer or can mention a competitor's offer.
Balance Transfer
Move high-interest credit card debt to a card offering 0% interest for a promotional period. Just make sure you can pay it off before the promotional rate ends.
Debt Consolidation
Combine multiple debts into a single loan with a lower interest rate. This simplifies your payments and can save you thousands in interest. At Loans123, we compare 30+ lenders to find the best consolidation option for your situation.
Find Extra Money
The more money you can throw at your debt, the faster you'll be free. Here are ways to boost your debt attack fund:
Cut Expenses
- Review subscriptions and cancel what you don't use
- Switch to a cheaper phone or internet plan
- Meal plan to reduce food waste and takeaway spending
- Shop around for better insurance rates
Increase Income
- Sell items you no longer need (Facebook Marketplace, Gumtree)
- Pick up overtime or extra shifts
- Start a side hustle using your skills
- Ask for a raise at work
Use Windfalls Wisely
Tax refund? Birthday money? Work bonus? Put at least 50% directly towards your debt before you're tempted to spend it.
Avoid Adding New Debt
There's no point bailing water if you don't plug the hole in the boat.
- Stop using credit cards - switch to debit or cash
- Delete buy now pay later apps from your phone
- Wait 48 hours before any non-essential purchase
- Unsubscribe from marketing emails that tempt you to spend
Get Help If You Need It
If you're struggling, you don't have to figure this out alone. There are free resources available:
National Debt Helpline: 1800 007 007 - Free, confidential financial counselling from qualified professionals.
Hardship Provisions: If you can't make payments due to unemployment, illness, or changed circumstances, contact your lender. By law, they must consider hardship applications and may be able to reduce payments, pause interest, or extend your loan term.
Common Mistakes to Avoid
| Mistake | Why It Hurts | What to Do Instead |
|---|---|---|
| Only paying minimums | Takes decades, costs thousands in interest | Pay as much extra as possible |
| Ignoring the problem | Debt grows, stress increases | Face it head-on with a plan |
| No emergency fund | Unexpected costs go back on credit | Save $1,000 starter emergency fund |
| Being too aggressive | Burnout leads to giving up | Create a sustainable plan |
Your Debt-Free Timeline
How long will it take? That depends on how much you owe and how much you can pay. But here's a rough guide:
| Total Debt | Extra Payment/Month | Approximate Timeline |
|---|---|---|
| $5,000 | $300 | 18 months |
| $10,000 | $400 | 2.5 years |
| $20,000 | $500 | 3.5 years |
| $30,000 | $600 | 4.5 years |
Note: These are estimates assuming average interest rates. Your timeline may vary.
The Bottom Line
Getting out of debt isn't about extreme sacrifices or magic solutions. It's about clarity, consistency, and having a plan that works with your life.
Remember:
- Know your numbers
- Pick a strategy and stick with it
- Reduce your interest rates where possible
- Stop adding new debt
- Ask for help when you need it
Every payment gets you closer to freedom. You've got this.
If debt consolidation could help simplify your payments and reduce your interest, Loans123 is here to help. We compare options from 30+ lenders to find the best solution for your situation - and our service is free to you. Call us on 1800 079 147 or apply online today.
Written by
Loans123 Team
The Loans123 team has over 10 years of experience helping Australians find the right finance solutions. We compare 30+ lenders to get you the best deal.
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