Debt slowly eats away at your financial health. Each payment you make towards interest is burned money. For those carrying anywhere from a little debt to a crushing amount, how do you even go about fixing this problem? Here are some ways to get out of debt. They only require knowledge, planning, and willpower to complete, leading you to a life of financial freedom.
- Get a free credit report from one of the three credit agencies and analyze your situation. If there are any problem accounts, attack them first to restore your credit.
- Pay down your highest interest-rate debts first. For most people, this will be credit cards. One of the best ways to get out of credit card debt is to pay more than the minimum payment. Recent reforms require credit companies to be more forthcoming with how long it will take you to pay off your debt, but most people don’t realize that paying the minimum keeps them locked in years of debt slavery. Create a budget that eliminates unneeded expenses and luxuries, and put the savings towards wiping out the high-interest debt.
- Consider moving debt around from high-interest to low-interest accounts. For example, you could transfer balances to lower interest cards, or use a home-equity line of credit to wipe out higher interest rate debts. This is probably the best ways to get out of debt fast, but it is also dangerous: don’t let unused credit get filled up again, otherwise you’ll find yourself back where you started. Many credit cards offer promotions for balance transfers at a very low percent, so consider moving your debt around to these offers. (Always read the fine print for the stipulations.)
- The best way to get out of debt is to use all your assets at your disposal towards paying it down. Money sitting in a savings account is making a very low rate of return. Using that money to pay off a chunk of your debt will save you many dollars – it is like you are earning the %APR of the credit card back into your pocket! Also, if you have any assets you can sell – car, boat, motorcycle, electronics, etc. – consider parting with it to help pay off your outstanding debts. It may hurt now, but you’ll save yourself a deeper, more significant long-term pain.
- Borrow from other sources – 401(k)s, friends and families, life insurance plans, etc. Be careful of any penalties that may be assessed by withdrawing money early. If you borrow from friends or family, make sure you draw up the terms of the loan in writing so that everyone involved is clear and comfortable with the arrangement.
- Stop buying stuff. The more your debt increases, the worse it will get.
- Find other ways to entertain yourself aside from gadgets and expensive goods. Find cheap hobbies that can take up your time and save you money which you can then use to repay your debts.
- Find some odd jobs/part-time work to increase your income, and use that money to pay off your debt.
- Hire a debt counselor to help you overcome your debt. These professionals will help you tailor your plan to your individual financial situation. For instance, a group like this may help you…
- Reorganize your debt and get better terms. If you are near the edge of bankruptcy, lenders may work with you to lower your payments and improve the terms of your credit. They don’t want you to go bankrupt because it is a financial risk to them, so they will often go the extra mile to help you.
- In the end, bankruptcy is the final option. Do not do this lightly. Always consult with professionals, including lawyers, to go over all your options.
For more information, check out The Debt Solution System.