How to Break Out of a Debt Cycle

How to Break Out of a Debt Cycle

It is, sadly, far too easy for anyone to get into a difficult cycle of debt. However, the good news is that despite debt so easily taking hold, there are ways that you can eliminate your debt and get everything paid off, putting you in a stronger financial position. Read on to read up on tips for how to break out debt for good.

Why Debt Happens

If you are looking for a solution for how to reduce debt, you may have found yourself at a dead end. As you reduce the debt balance of one account, another account may have the interest rate raised. This can lead to a long-term debt cycle that has no end in sight.

One of the key factors in learning how to reduce debt is to understand how the debt escalated in the first place. This can go a long way toward helping you avoid similar situations in the future.

More often than not, people find themselves struggling with debt as a result of simply spending more than they can afford. For this reason, it is advisable to always save for purchases. Alternatively, if you are in urgent need and if it is possible, borrow the money from a friend or family member who will be more lenient when it comes to a repayment plan. 

Even borrowing lower amounts can lead to a short-term debt cycle that could potentially turn into something more dire if it is not managed effectively.

There are many reasons aside from spending that might cause a debt cycle. These include loss of employment or a change in income, divorce or separation, a lack of savings or hefty medical bills. Whatever the reason, breaking the cycle should be a priority.

How to Improve Your Debt and Break the Cycle

In an attempt to reduce debt, many people will throw every spare penny they have at their creditors in the hope that this will more quickly clear their balance. While this may seem like a good idea, this will leave you with very little free cash for your day to day needs, thus leading to the need to take out more credit. 

To effectively clear your debt and break free from its chains, you should work out a detailed plan of what you owe, the interest rates on your debt and how much you are comfortably able to pay each month without leaving yourself short for necessities. Of course, this should all be linked to your other financial plans, such as money for bills and your mortgage as well as anything you are adding to you savings. With that in mind, here are some tips for breaking the debt cycle more easily.

  • Have some savings in place before making any effort to increase your monthly debt repayments. Sticking with the minimum amount every month while you save a small emergency fund can mean the difference between success and failure. If you have a backup, you will be less likely to take out further loans during the time that you are paying off your debts.
  • Learn from your mistakes and commit to paying off what you owe. As you have already discovered, learning how you got into debt can give you the knowledge you will need to protect yourself from it in the future. Put this to good use as a way of avoiding falling into the temptation of borrowing again. Additionally, you should make a commitment to yourself that you will remain disciplined and focus on becoming debt-free. 
  • Consider refinancing your current debts or perhaps consolidating them into one, more manageable monthly payment. One way to consolidate is by transferring your credit card debt onto a new credit card. This will often give you a period of lower or zero interest. Another way is to take out one larger loan to pay off all of your smaller loans. This will likely be more affordable and will allow you to clear the balance more quickly.
  • Once you have saved up some money to keep you afloat from day to day, you can start making larger repayments on your accounts. Doing this will clear them more quickly and will get your credit score looking healthier.
  • Be prepared to go without for a little while. Oftentimes, people will use their credit to splurge and live outside of their means. But when trying to get out of the debt cycle, it is important to be ready to cut back on spending. This might mean eating at home rather than in a restaurant or buying fewer unnecessary items. This money can then go towards lowering your account balances.
  • Create a budget and stick to it. There is no greater tool when it comes to debt management than having a budget that you can stick to. This allows you to see where your money is going and allocate set amounts for everything you will need. 

Credit Card Debt

In some ways, credit card debt can be much more crippling because of revolving debt. This is when you spend some money and you pay it back, but then you spend it again because you have available credit. For this reason, a lot of people find that clearing their credit card debt can be extremely challenging. 

When looking at how to lower credit card debt, there may be some additional things you can do to break the cycle.

  • Get rid of the credit card and clear any saved credit card details from your computer or smart device. If you do not have access to the card, you will not be able to spend with it.
  • As you pay off the debt, ask your credit card provider to lower the limit of the account. This may temporarily affect your credit score, as you will be closer to your credit limit. However, it will remove your ability to spend on the card again. Once your credit card is paid off, it will reflect positively on your credit report.
  • If you have multiple credit cards, try to focus on clearing one at a time. One of the most effective tactics when doing this is to tackle the higher interest cards first.
  • Be sure to have a direct deposit from your savings or checking account set up for your credit card monthly payments. This will prevent fees if you forget to pay, and if you wish to pay more, you can.


There will likely come a time in everyone’s life when debt is an issue. For many people, this issue remains ongoing for years, leaving them financially strained. However, breaking the debt cycle is possible. It simply requires a little commitment and a clear, solid plan.

By Admin