The Worst Way to Get Out of Debt

Debt can feel like a heavy weight, and for many, it becomes an overwhelming cycle of trying to catch up month after month. But in our attempt to find solutions, some people fall for the worst advice—taking out loans to pay off debt. I recently received a piece of mail that illustrates this perfectly, and it’s a prime example of why borrowing more money is often the worst way to tackle your financial problems.

A Classic Debt Trap in My Mailbox

The letter that got me riled up was from a lender offering a loan to “get rid of credit card debt in as little as 36 months.” At first glance, it sounds promising. But as I read further, the details were infuriating. Not only was the offer to borrow up to $40,000, but the interest rate could climb as high as 29.99%.

What’s even worse was the sneaky pitch that allowed people to borrow for not just debt repayment but also for “other expenses like remodeling your kitchen, a family vacation, or whatever your needs might be.” This is a classic example of debt consolidation gone wrong. Instead of helping people get out of debt, these types of loans encourage them to take on more debt than necessary, which only deepens their financial struggles.

The Problem with Debt Consolidation Loans

Here’s the harsh truth: Debt consolidation loans and balance transfers are only helpful if they actually save you money. For instance, if you’re paying 24.99% interest on a credit card and transfer that balance to a card offering 0% interest for an introductory period, it can work. But even then, you need to factor in the balance transfer fee, usually around 3%.

However, borrowing more money to pay off existing debt, especially with a sky-high interest rate, is never the answer. In fact, it’s a strategy that only makes things worse in the long run.

How to Get Out of Debt Without Borrowing More

The best way to get out of debt is actually the simplest—and the one that requires the most discipline: stop borrowing more money. Here’s how you can do it:

1. Track Your Spending

The first step to gaining control of your money is understanding where it’s going. Start tracking every dollar you spend, and I guarantee you’ll be shocked at how much is wasted on things you don’t need. It’s a painful process at first, but as my husband Greg often says, “To stop sucking, you first have to know you suck.” Recognizing where you’re overspending is the first step to making better choices.

2. Create a Budget

Once you know where your money is going, the next step is to create a budget. For us, we use a zero-sum budget, where we base our spending on the previous month’s income. It’s a simple system, but it works. List out your essential expenses (like bills and groceries) and compare them to your income. Once you know where your money is going, you can cut out unnecessary spending and redirect those funds toward paying off your debt.

3. Start Paying Off Debt

Once you’ve freed up some money by tracking your spending and sticking to your budget, it’s time to start paying down your debt. Whether you choose the debt snowball method (paying off your smallest debt first) or the debt avalanche method (starting with the highest interest rate), the important part is simply to start. Set up a plan and stick with it. The key to paying off debt is consistency and discipline.

The Bottom Line

Borrowing more money to get out of debt is one of the worst financial decisions you can make. While it may seem tempting to consolidate debt with a new loan, the reality is that it often leads to more debt and higher interest rates. Instead, focus on cutting your expenses, tracking your spending, and developing a plan to pay down your existing debt.

It may not be the fastest solution, but it’s the most sustainable. The best way to get ahead financially is to avoid accumulating more debt and take control of the money you already have.