How to Get Out of Debt: A Practical Step-by-Step Guide for Australians

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A working sequence for Australians: list every debt, understand the interest, build a budget, prioritise repayments, consider hardship, then review progress.

Getting out of debt in Australia is rarely one dramatic move. It is a sequence: see the full picture, stop guessing at the interest, make a budget that survives payday, pick an order for extra repayments, ask about hardship if the numbers do not work, and check in every month. This is general information, not a promise of a timeline.

Step 1. List all debts

Open the banking app, the BNPL apps, and the email folder you have been avoiding. For each facility write the lender, balance, interest rate, minimum repayment, due date, and whether you are up to date. Include the boring ones: an old store card, a dental payment plan, a tax bill. A missing line item is how people “mysteriously” overspend in week two.

Step 2. Understand interest rates

A $4,000 card at 21% can cost more each year than an $8,000 personal loan at 9%. Until the rates sit next to the balances, your brain will keep treating the biggest number as the most urgent. It might be. It might not. How to prioritise debts is the longer version of this point.

Step 3. Build a budget

Use actual weeks, not a fantasy month. Rent or mortgage, food, transport, medicine, child costs, then minimum debt repayments. Whatever is left is the only honest “extra” you can throw at debt. If the leftover is zero or negative, you are in hardship territory, not spreadsheet territory. See Budget and cash flow and our cost-of-living piece for Melbourne.

Step 4. Prioritise repayments

Keep minimums current on accounts you intend to protect. Put extra money on one target. Snowball if you need early wins. Avalanche if you can live with a slower emotional payoff and want less interest. Write the rule down so you do not reshuffle it every Friday night. Detail sits in How to build a debt repayment plan.

Step 5. Consider hardship

If you cannot meet the minimums, call the existing lender before the account is a wreck. Have a short explanation of what changed and a figure you can actually pay. What is financial hardship? covers what that conversation can include, and What happens if you miss a loan repayment? covers the other side.

Step 6. Review progress

Once a month, update balances and the leftover cash figure. If a card is cleared, close it or freeze it if that is what stops a relapse. If income dropped, redo the budget before you “try harder”. Trying harder on a plan that no longer fits is how people burn out.

Illustrative example only: Jordan lists $18,400 across two cards and a personal loan, builds a $220 leftover after essentials, and puts it on the 22% card while keeping other minimums. After four months the high-rate card is gone. The leftover then moves to the next target. Your numbers will differ.

Common mistakes

Common questions

How long will it take to get out of debt?

It depends on balances, rates, leftover cash, and whether hardship or consolidation is in the mix. Anyone quoting a fixed “debt-free date” without your numbers is guessing.

Should I use savings to clear debt?

Sometimes. Keep a small buffer if losing the last of your cash would force you onto cards again. This is a personal trade-off, not a slogan.

Where does Lumiro fit in this sequence?

Debt management is the commercial hub for that structured conversation. The articles in this series are the educational layer.

Not sure where to start? Talk to our team about your situation. Talk to us

This article is general information only. It is not financial, credit, legal or personal advice. Your circumstances matter, and outcomes are not guaranteed. Free help is also available through the National Debt Helpline (1800 007 007) and Moneysmart.