Getting out of debt: a guide

Being in debt is stressful and makes forward planning difficult, if not impossible. It comes as no surprise then that getting out of debt is a common financial goal for many people in Sweden and around the world. With careful planning and discipline, it’s entirely possible to achieve this objective, but it requires persistence and a sense of realism. 

This guide will provide you with practical strategies and steps to help you eliminate debt while managing your finances effectively. There are several stages to becoming debt-free, a process which begins with measuring your debts, then setting achievable goals to reduce them, and prioritising the most pressing financial stresses. Slowly, you can work your way out of debt and towards financial freedom.

For unpayable debts, negotiation may be your best bet, and many banks and lenders are willing to temporarily freeze interest payments or provide other forms of relief to borrowers. Of course, taking on new debt while you still have a negative overall balance is something to avoid.

The first step to living free of debt is to make a full inventory of how much you currently owe. Begin by gathering all your debt-related information, including outstanding balances, interest rates, and monthly minimum payments. Create a detailed list of your debts, such as credit card balances, personal loans, mortgages, and any other forms of debt. This will give you a clear overview of your financial situation. 

Remember to include overdrafts and, if necessary, unpaid invoices alongside regular debts such as credit card bills and mortgages. While doing this, make a note of the interest rates on each of your debts, categorising them as high or low, and also whether any debts – such as tax payments – have moved into a legal enforcement stage. This will become your top priority.

Define your financial objectives for the coming year. Determine how much debt you want to pay off and by when; prioritising those which are in default or have high interest payments. Setting specific, measurable, and achievable goals will keep you motivated and focused on your debt repayment journey. 

You need a clear view of your incoming funds such as salaries and any windfalls, so you can work out how much you can afford to pay off. At this point you will probably be aware if your debts vastly outstrip your income – if you find yourself in a situation where interest payments far outstrip earnings, you will likely need to negotiate or take advantage of government schemes to reduce debts.

Work out your disposable income, after essential bills such as rent. This will allow you to form a budget and work out a timeline to repay your debts. A well-structured budget is the foundation of your debt repayment plan. Make sure you do not over-promise to creditors and consider negotiating to see whether you can freeze interest payments on existing debts. Start by tackling debts with the highest interest rates, such as credit card debt. Pay more than the minimum required amount to reduce the principal balance faster and save on interest charges.

Debt consolidation involves taking out a single loan to pay off multiple debts. This can simplify your finances and potentially lower your interest rate. Research consolidation options, such as personal loans or balance transfer credit cards, to see if they make financial sense for you. It is normally simpler and less stressful to deal with a single creditor than multiple and can also help prevent legal action being taken for late payment. Any debts which have progressed to the stage where debt collectors or other agencies are involved should be considered a top priority. Consider checking on sites such as to find out more about your consolidation options.

Contact your creditors to discuss your financial situation. In some cases, they may be willing to offer temporary relief by lowering interest rates or providing flexible repayment plans. Be open and honest about your circumstances, and do not overpromise on repayments. A failure to meet repayment amounts will be viewed more negatively than a low repayment level. Do not allow all of your assets to be taken up by debt repayments. Building an emergency fund is essential to prevent falling back into debt due to unexpected expenses: aim to save three to six months’ worth of living expenses in a high-yield savings account. Also, if you owe money to a bank, consider using another account to receive your salary to ensure you remain in control of any debt repayments. If possible, find opportunities to boost your income, such as taking on a part-time job, freelancing, or selling unused items. Extra income can accelerate your debt repayment progress.

Alongside improving your earnings, consider cutting expenditure. Review your budget for non-essential expenses that can be reduced or eliminated. Consider downsizing your lifestyle temporarily to allocate more funds toward debt repayment. Do not waste money on luxury goods or unnecessary expense when you have debt collecting interest.

With an accurate inventory and budget, you should be able to plot a time frame towards financial freedom. Getting out of debt in Sweden is achievable with careful planning, budgeting, and discipline. By creating a clear debt repayment strategy, setting financial goals, and making consistent efforts to reduce your debt, you can regain control of your finances and work towards a debt-free future. Remember that becoming debt-free is a gradual process, so stay patient and stay focused on your financial goals. As a final note, if you have no possibility of repaying your debts – either because you do not work, or have such vast sums outstanding that repayment is impossible – seek assistance from a solicitor or local government authority, as many schemes are available to neutralise unpayable debts. In some circumstances, if you can prove the debt facility was mis-sold (perhaps because they did not check your financial situation), you may be able to have interest refunded. Bankruptcy remains a last resort, but will – at a cost to your credit rating and financial standing for a number of years – eliminate any debt problems.