How to Get Out of Debt with No Money and Bad Credit

Debt can be difficult to overcome, especially if you’re already struggling to make ends meet. Throw bad credit into the mix, and it can feel downright impossible.

If this sounds like your situation, don’t panic. There are ways to get out of debt, even if you’re currently strapped for cash and your credit is in bad shape.

Read on to find out how to get out of debt with no money and bad credit.

Strategies you can use to get out of debt with no money and bad credit

1. Create a budget and stick to it

If you have no money and bad credit, creating a budget is essential to getting out of debt.

Start by listing your income and your regular expenses, such as rent, utilities, gas or cab fare, groceries and so on. Also list unnecessary expenditures like eating out, streaming subscriptions, etc. Knowing how much money you have coming in and going out can help you see how much you can afford to put toward your debt.

More importantly, it can help you see where it’s possible to make cuts or changes and free up some more money to put toward paying off your debt.

Perhaps you can start cooking more at home and eating out less. Maybe you can get by with fewer streaming subscriptions. Or perhaps you can start shopping for your groceries in bulk or clipping coupons to save money.

Of course, changing your lifestyle or giving up some comforts and luxuries to which you are accustomed may be difficult at first. But if the alternative is being trapped in a never-ending cycle of debt, it’s best to make these changes as soon as possible. 

2. Negotiate with creditors

Though negotiating with creditors might make some people uncomfortable, it can be a particularly useful and effective strategy for getting out of debt when you have no money and bad credit.

Call your creditors and explain that you’re having financial difficulty and ask what they can do to help.

Make sure you’re speaking with a manager or supervisor, i.e., someone who is actually authorized to make decisions. Request that they temporarily or permanently lower your monthly payments or the interest rate on your loans.

Regardless of your current credit and financial status, some creditors might prefer to work with you by offering a lower interest rate, for example, if it means that they’ll get their cash back in full. Remember, if you are stuck with a high interest rate, more of your monthly payment goes to interest instead of principal, which can make it harder to get out of debt.

Keep in mind, however, that creditors are under no obligation to negotiate with you. Still, it might be worth talking to them and trying to negotiate, especially if you’re struggling financially.

3. Get a side hustle to bring in more income

While cutting your expenses can be a useful strategy for getting out of debt when you have no money and bad credit, an even better strategy is to make extra money. One easy way is by .

A side hustle is any job or business that generates extra income. It can be something as simple as walking dogs or mowing lawns, or something more advanced like starting a blog, selling handmade jewelry or driving for a ridesharing service like Uber or Lyft. 

Whatever it is, a side hustle can give you the extra cash you need to start paying down your debt and get back on track financially.

When picking a side hustle, it’s best to choose one with flexible hours or that you can fit around your current schedule. This way, your side hustle won’t interfere with your primary job.

It might also be a good idea to choose something you're passionate about. You’ll be more motivated to work on your side hustle if it’s one that you consider to be fun, not a chore.

4. Consider Credit Counseling Agencies

Another move that could help you get out of debt when you have no money and bad credit is consulting with a credit counseling agency. A good and legitimate credit counseling agency will talk with you about your circumstances and design a debt payment plan that’s specifically tailored to your needs. They can:

• Help you set an appropriate budget to keep track of and manage your money

• Evaluate an existing budget you've created to suggest changes that’ll help you get out of debt faster

• Negotiate a lower interest rate with creditors on your behalf and enroll you into a debt management plan

5. File for Bankruptcy

Filing for bankruptcy may seem like a drastic measure, but if you have bad credit and no money, it can be a good option for getting out of debt while also giving you time to rebuild your financial portfolio. However, it should only be used as a last resort.

You can file either a Chapter 7 liquidation bankruptcy, which wipes out most — but not all — of your debts, or a Chapter 13 bankruptcy, which gives you three to five years to pay what you owe and could also reduce the amount of some of your debts.

Needless to say, filing for bankruptcy is a big decision that you shouldn’t take lightly. If you're considering it, speak to a bankruptcy lawyer first to see if it's a good option for you.

Avoid getting into debt in the future

As you use these strategies to get out of debt and, hopefully, improve your credit, it's also a good idea to try to understand what got you into debt in the first place so you can avoid it in the future.

For example, did you accumulate debt because life threw you a curveball and you didn't have a safety net to pay your bills, leaving credit card debt as your only option to stay afloat? If that’s the case, start working on creating an emergency fund.

A good amount of cash tucked away can make a world of difference when unexpected financial emergencies or problems arise and can help you avoid plunging into debt.

Your debt problems could’ve also been caused by poor spending habits. For example, do you enjoy going on expensive shopping sprees only to be surprised by how much you owe when your credit card bill arrives? If you want to avoid debt problems in the future, it may be time to find a hobby other than shopping.

By figuring out what caused you to land in debt, whether a one-time experience, a lifestyle or habits discussed above, you can take the necessary steps to avoid getting into debt again.

Meanwhile, if high credit card debt is getting in the way of living a debt-free life or if high-interest rates are eating into your budget, Tally† may be able to help. Tally consolidates your high-interest credit cards into a single, lower-interest loan, which can save you money and help you pay off your balances faster.

Check out Tally’s debt calculator to find out just how much Tally’s line of credit can save you on your current credit card balances.

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Tally Technologies, Inc. NMLS # 1492782 (nmlsconsumeraccess.org). Loans made or arranged pursuant to a California Finance Lenders Law License or other laws in your state.