How to Break a Debt Cycle: 9 Tips

Debt cycles are easy to fall into. It starts when you take out a loan, charge up your credit cards, or fall behind on your mortgage. Your interest balance goes up, so you struggle to pay off your debts at all. Then, an emergency arises, and without savings to fall back on, you have to take on more debt. 

Millions of Americans are trapped in long-term debt cycles they can’t escape. In 2025, U.S. consumer debt reached an all-time high of $4.997 trillion, and the average consumer debt is $101,915 as of the end of 2022, according to Experian. So you aren’t alone. But with a little planning and some discipline, you don’t have to be stuck any longer. 

What is the first step to getting out of debt?

The first step to paying off debt is understanding your finances. Start with mapping out your monthly income against your debts and expenses. Once you’ve laid out your finances, you can approach your situation with a bird’s-eye view and adopt a debt payoff strategy to help you break the cycle.   

Create a debt payoff strategy

Most experts recommend one of two debt payoff methods to break cycles of debt: the debt avalanche or the debt snowball strategy. 

1. Debt avalanche method

The debt avalanche method involves paying off your most toxic debts first. You make the minimum payments on all your accounts and throw any extra cash at your highest-interest debt until it’s paid off. Once that balance reaches zero, you roll the extra cash onto the next-highest debt and on down the line. 

This debt-payoff strategy can come with more savings over time because you’re not wasting your income on interest payments. But if you have large balances on your accounts, you may not feel like you’re making progress for a long time.  

2. Debt snowball method

For larger balances, you may try the debt snowball strategy to feel like you’re making more progress. With this method, you pay as much as you can toward the debt with the lowest balance while making minimum payments on your other debts. Then, when your balance reaches zero, you roll the payment onto the next-lowest balance on the list. 

Typically, you’ll pay more in interest over time with this method, but you’ll wipe out individual debts faster and build momentum to tackle the biggest debts.  

9 tips to help you break out of a debt cycle

Paying down your debts is only half the fight. If you want to break your cycle of debt once and for all, these tips can help.

1. Build an emergency fund

An emergency fund is a safety net that catches you when life happens. Whether you encounter unexpected medical bills, your car breaks down, or you lose your job, your emergency fund can save you from taking on more debt in the future. Emergency funds can also come in handy when surprise expenses occur like an invitation to a friend’s destination wedding.

Life is full of little hiccups, too — stuff like a broken phone or a surprise invitation to a friend’s destination wedding. These things may not be full-blown emergencies, but they can still put a dent in your wallet if you’re not prepared. For things like this, you’ll want to start a rainy day fund.

2. Create a budget and stick to it 

The process of budgeting involves meticulously assessing your income, expenses, and financial goals. With this information, you can allocate every dollar with purpose and intention, ensuring that your hard-earned money serves you best. This proactive approach shields you from falling into the same financial pitfalls that might have led to debt in the past.

3. Ditch your credit cards

If you’re the kind of person who struggles with impulse shopping and credit card debt, consider cutting them up to break the overspending cycle. 

4. Avoid shopping without a list

Whether you’re picking up groceries or household items, make a list before you leave the house. Using a list can reduce the temptation to spend and remind you exactly what you need when you’re navigating a busy store. 

5. Pay more than the minimum amount

While it’s not always possible, if you can pay more than the minimum on your debts, you’ll pay them down faster. Plus, you’ll save money on interest.  

6. Buy what you can afford

Just because you can pay for something now — or put it on a credit card — doesn’t mean that you can actually afford it. When making a purchase, ask yourself whether you can afford to pay for it in full — not whether you can make the debt payment.  

7. Ask your credit card providers for a better rate

Many lenders will work with you to help you pay your debts, especially if you have a good credit history or an established relationship with the company. Try calling your credit card providers to see what your options are for reducing your interest rates.

Certain credit card companies provide temporary hardship programs designed to assist customers facing financial difficulties. These programs often offer reduced payments, or the option to temporarily pause payments, without negatively impacting your credit score. 

In the case of holding multiple credit cards with high-interest rates, considering debt consolidation might be a good move. By consolidating your debts into one loan with a lower interest rate, you’ll benefit from a more manageable monthly payment, ultimately leading to long-term interest savings. It’s a strategic approach that can simplify your financial obligations and help you make steady progress toward debt repayment.

MoneyLion can help you consolidate your debt! MoneyLion offers a service to help you find personal loan offers based on the info you provide. You can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts.

8. Apply extra cash toward debt

If you have cash left over after paying your bills and contributing to your emergency savings, consider putting it toward your debts. The faster you pay off debt, the quicker you’ll free up your income.   

9. Track your spending

Staying on top of your spending can help you control where your money goes — and identify leaks in your budget. At the end of the month, you may be surprised to see how much you’re spending on daily coffee runs or weekly takeout with friends. 

MoneyLion is here to help! See all your finances in one convenient place for better financial management.

Ditching debt for good 

Paying off debt might mean making some sacrifices now, but it will be worth it in the end. Once you kick that debt to the curb, a huge weight will be lifted off your shoulders.

No more stressing about those annoying interest rates or dealing with piles of bills. You’ll have more cash in your pocket, and that’s a game-changer!

What are some effective strategies for paying off debt?

Start with budgeting and prioritizing high-interest debts. Consider the avalanche or snowball methods and try making extra payments whenever possible.

How long does it typically take to pay off debt?

It varies depending on the amount owed and your payment plan, but staying consistent with your payments can help you reach debt-free status sooner.

Should I consider debt settlement or negotiation?

While it’s an option, debt settlement should be approached cautiously. It may have consequences on your credit score and might not work with all creditors. It’s best to seek advice from a financial adviser before proceeding.