How to Get Out of Debt and Break the Debt Cycle

Fighting systemic inequalities like the wage gap, the need to financially support extended family members, and the lack of steady employment can make figuring out how to get out of debt seem nearly impossible for many members of the Black community who rely heavily on credit card debt and high-interest loans to make ends meet.

The good news is, even if you fall behind on payments, successfully managing debt and rebuilding credit can help create financial stability.

Let’s explore debt-reduction strategies, how to address systemic barriers to reducing debt, and the importance of rebuilding credit after debt challenges.

How to Get Out of Debt: Try These Debt Reduction Strategies

If you’re in debt, you’re not alone. The Federal Reserve Bank of New York’s Household Debt and Credit Report shows household debt hit $18.59 trillion in the third quarter of 2025.

Using debt-reduction strategies can help you save on interest and reduce your credit balances. The snowball and avalanche methods are two popular debt payoff strategies.

To follow the snowball method:

• List your debts from the smallest to the largest balance.
• Make minimum payments on each of your debts, except the smallest.
• Use all extra income to pay the smallest balance off first.
• After paying off the smallest debt, repeat the process for the next-smallest debt.

Paying off smaller debts quickly and then focusing on the next one in the snowball method creates a sense of achievement and provides motivation to press onward.

To follow the avalanche method:

• List your debts from the highest interest rate to the lowest interest rate.
• Make minimum payments on each of your debts, except the one with the highest interest rate.
• Put all extra income toward the debt with the highest interest rate until it is paid off.
• Repeat the process with the next-highest-interest-rate debt.

Paying the debt with the highest interest rate off first saves you money on interest charges, which will eliminate debt faster. The lower the balance, the less your payment goes toward interest, and the more it applies to the principal balance.

More Important Debt Reduction Tips

Generating extra money to apply to the balances above the minimum payments is essential. So, when focusing on how to get out of debt and break the debt cycle, here are some important tips:

• Create a budget and stick to it. Track your income and expenses, and look for any areas where you overspend. Avoid impulse buys, cut unnecessary spending, and apply these funds toward paying off debt.
• Stop incurring new debt and build an emergency fund to cover three to six months of bills/living expenses when unexpected things like illness, car or house repairs, or job loss occur (instead of accumulating more debt).
• Boost your income to apply towards debt. Have a garage sale, sell items on eBay, get a second job, or pick up a side hustle (food or grocery delivery, Uber driver, dog walker/pet sitter, freelance writing, graphic artist, or photography, and more).
• Make all your minimum payments and pay all your household bills on time to avoid spending extra money on late fees.
• Don’t pay any credit accounts or loans 30 days late or more, as doing so will negatively impact your credit report and lower your credit score. Lenders can deny credit or charge higher interest rates to customers with poor or fair credit.
• Consider any available debt consolidation options to reduce interest and roll multiple credit balances into one payment.

If your amount of debt is too overwhelming, consider contacting a credit counselor to discuss potentially working with your creditors to negotiate a debt settlement.

How to Address Systemic Barriers that Impact Debt

Systemic barriers to wealth-building and generational wealth-building for Black families that also impact debt include redlining (discriminating against by denying “mortgages, insurance loans, and other financial services to residents of certain areas based on race or ethnicity”), low income, wage gap, and unstable employment, to name a few.

Financial disparities in Black communities also contribute to unique financial challenges Black individuals face, such as Black Tax, which refers to “regular payments given to family members, to help support them financially.”

Financial hardships also lead to heavier usage of credit or high-interest loans to get by and a high rate of student loan defaults by Black borrowers.

To address systemic barriers, you can:

• Support policies and organizations that promote homeownership in racial and ethnic communities to build generational wealth via real estate holdings.
• Allocate funds to help extended family members without hindering your own household’s financial stability.
• Support student loan assistance programs and student loan forgiveness initiatives to reduce and prevent Black borrower defaults on student loans.
• Give back to the community by supporting Black-owned businesses.
• Create an estate plan to protect and provide for your family upon your passing.
• To help close the wealth gap, invest as much as you can as early as possible, under guidance from a professional investment advisor.

How to Rebuild Your Credit

Once you’ve learned how to get out of debt (and applied your knowledge), rebuilding credit to ensure financial stability is vital. Here’s how to improve credit after debt challenges:

• Pay all your bills on time every month.
• Keep credit card balances at zero or under 30% of your credit line.
• Don’t apply for multiple credit accounts in a short period, and only apply when necessary.
• If you need a credit card and get denied, consider getting a secured credit card that requires a cash deposit to open.
• If you do use a credit card, pay your balance in full each month to save on interest charges and prevent getting back into excessive debt.

Getting out of debt and breaking the debt cycle is possible; follow these debt-reduction strategies and tips, and you’ll be on your way!

Sponsored by JPMorganChase

MSR + JPMorgan Chase have partnered to bring you the Finances FYI series. JPMorganChase is committed to helping close the racial wealth gap and driving economic inclusion for Black, Hispanic and Latino communities. Join us every Monday for tips, advice, and vital information to improve your financial literacy.