How to Get Out of Debt in Australia: A Step-by-Step Guide (2026)

You cannot manage a debt problem you have not fully mapped:

• List every debt: Credit cards (balance, interest rate, minimum payment), personal loans (balance, rate, remaining term), BNPL balances, car finance, any outstanding bills in collections. Do not exclude debts because they feel small or manageable - total visibility is the starting point.
• Check your credit report: Your free credit report (via Equifax, Experian, or illion at mycreditfile.com.au or creditreportaustralia.com.au) shows all active credit facilities and any defaults or judgements. Surprises here are important to address.
• Calculate the true cost: For each debt, identify the annual interest rate and calculate how much interest you are paying per month. This converts abstract percentages into concrete costs and clarifies which debts are most damaging.

Two proven strategies - choose based on your psychology:

• Avalanche method (mathematically optimal): Pay minimums on all debts, direct all extra money to the highest-interest-rate debt first. Once it is paid off, redirect that payment to the next highest rate. This minimises total interest paid over the repayment period.
• Snowball method (psychologically powerful): Pay minimums on all debts, direct all extra money to the smallest balance first - regardless of interest rate. Each paid-off debt creates a visible win and momentum. Research shows higher completion rates than the avalanche method for many people.
• Which to choose: If you can maintain motivation regardless of how long it takes, use avalanche (saves more money). If you need early wins to stay on track, use snowball. A hybrid - clearing one small balance first for momentum, then switching to highest rate - also works well.
• Do not pay the minimum only: Credit card minimum repayments are designed to maximise interest income for the lender. A $5,000 balance at 20% interest paid at the minimum only takes over 20 years to clear and costs more in interest than the original balance.

Reducing the interest rate on your debt accelerates the paydown significantly:

• Balance transfer credit cards: Many Australian banks offer 0% balance transfer promotional periods (12–24 months). Transferring existing high-rate credit card debt to a 0% card means every dollar of repayment reduces the balance rather than being split between principal and interest. Balance transfer fees (1–3%) apply - still much cheaper than ongoing interest. Critical: do not use the new card for new purchases, and pay the balance before the promotional period ends.
• Personal loan consolidation: A personal loan at 8–12% to consolidate credit card debt at 20%+ reduces the interest burden significantly. Use a comparison site (Canstar, RateCity, Finder) to find the lowest rate you qualify for. Ensure you do not re-accumulate credit card debt after consolidation.
• Call your lender: Credit card issuers have retention teams who can offer lower interest rates or hardship arrangements for customers at risk of default. Calling and asking specifically - 'I am struggling with the interest rate; is there a lower rate available?' - often produces a result that comparison sites cannot.
• BNPL consolidation: If you have multiple active BNPL accounts (Afterpay, Zip, Humm), prioritise clearing them in full - BNPL late fees and account fees can add up significantly, and maintaining multiple accounts creates complexity.

The debt repayment timeline compresses dramatically with additional income applied to the highest-rate balance:

• Spending audit: A thorough review of three months of bank and card statements typically reveals $200–$500/month in genuinely discretionary spending - subscriptions unused, dining out frequency, impulse purchases. Redirecting this to debt repayment is the fastest lever.
• Sell non-essential assets: Unused items on Facebook Marketplace or eBay can generate $500–$3,000 for most households. A lump-sum payment against the highest-interest debt is mathematically equivalent to earning that money at the debt's interest rate.
• Side income: Delivery, rideshare, casual work, or selling skills (design, writing, tutoring, trades) can add $200–$800/month during an intensive debt repayment period.
• Government entitlements: Ensure you are receiving all payments and concessions you are entitled to - Family Tax Benefit, Rent Assistance, utility concessions, and health care card benefits. Use the Services Australia payment finder at servicesaustralia.gov.au.

If debt feels unmanageable, free professional assistance is available:

• National Debt Helpline: 1800 007 007 - free financial counselling from qualified counsellors, available Monday to Friday. Counsellors can negotiate directly with creditors on your behalf, help arrange hardship plans, and provide referrals to other services.
• Financial counsellors: All major banks are required to have hardship programs accessible by calling the bank's hardship team. A financial counsellor can negotiate hardship arrangements (reduced interest, paused repayments, extended terms) that are not available to customers calling without representation.
• MoneySmart: The Australian government's free financial guidance site (moneysmart.gov.au) has debt calculators, comparison tools, and step-by-step guides. Use the compound interest calculator to model repayment scenarios.
• Formal debt relief: In severe cases, formal debt management options include Part IX debt agreements (a legally binding arrangement with creditors) or personal bankruptcy. Both have significant long-term credit impacts and should only be considered after exhausting all other options with a financial counsellor.

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