How I Escaped Claude & Cursor Limits: The Ultimate Free Local AI Coding Setup with Ollama + Continue.dev (2026 Guide)

As a developer, I got tired of waiting 5 days for Claude resets and burning through Cursor’s $20 credit pool.

I was building an editorial platform and I was at a critical point where I was developing a new feature that involved build on the admin, server and the platform concurrently for complete context and I was hit with the weekly limit by Claude right in the middle of it, having to wait 5 days because of the context.

Frustrating ! ! !

I'm building at senior engineering level with Claude's Opus 4.7 in VS Code, and I want to be able to do that without usage limits, weekly caps, or surprise bills.

After lots of research online, I finally set up completely free, local AI models running directly in VS Code using Ollama + Continue.dev.

These models now handle most of my daily coding work and they’re shockingly good (some tasks feel close to Claude Opus 4.7 level).

This is the exact step-by-step guide that worked for me.

Why You Need This SetupNo more waiting for resets

• No credit pools or usage-based billing traps


• Works completely offline after download


• Private (your code never leaves your machine)


• Easy to switch between multiple free models

Step-by-Step Setup (Tested on MacBook Air M1 model)

Step 1: Install Ollama

Go to

Open any terminal and run:

ollama list

Running ollama list should show nothing at first.

You can use VS Code's terminal since we would be doing the whole work in VS code.

Step 2: Download Good Free Models

I started with these two:

In your terminal, run the following and wait for the download to be complete

ollama pull qwen2.5-coder:7b

ollama pull deepseek-coder-v2:16b

Wait till the two are done downloading. qwen2.5-coder is roughly 4.7gb in download size while deepseek-coder-v2 is roughly 8.9gb in download size.

Step 4: Configure Continue.dev

Now this is the slightly tricky part.

In the Continue topbar, click the gear icon to open settings

Replace everything in the config.yaml file with this configuration:

name: Local Config

version: 1.0.0

schema: v1



models:

  - name: Qwen2.5 Coder 7B

    provider: ollama

    model: qwen2.5-coder:7b



  - name: DeepSeek Coder V2 16B

    provider: ollama

    model: deepseek-coder-v2:16b



  - name: Qwen 1.5B Autocomplete

    provider: ollama

    model: qwen2.5-coder:1.5b

    roles:

      - autocomplete



tabAutocompleteModel:

  name: Qwen 1.5B Autocomplete

  provider: ollama

  model: qwen2.5-coder:1.5b

Save the file, close and reopen VS Code. Click on the continue tab on the sidebar again to open it, you should now have a Chat panel on Continue

VS Code IDE Download

https://ollama.com/download