Six Solutions that Could Help You Dump Your Debt
Debt can be a huge burden, especially when you are not sure if you will be able to repay it. The stress of making payments and paying on debts can threaten your health. Thankfully, there are ways to climb back out from a pile of crushing debt. Here are six strategies that will help you get rid of your debt once and for all.
1. Make More than Your Minimum Payments
If you are only paying the minimum payment each month on your debts, it will take an extremely long time to pay them off. Creditors, in fact, want you to make the minimum payment because it means they will make more from the interest. Instead, start paying more than the minimum. Be sure that extra payments are allowed, and that payment in excess of the minimum will be applied to the principle. The lower your principle is, the lower your future payments will be. As your payment decreases you are left with more cash to make larger payments. This is called snowballing, because your ability to pay off debt increases as you pick up speed, and the “snowball” grows.
2. Work on the Debt with the Highest Interest Rate First
Most people have debts with different interest rates. A good strategy is to always tackle the debt with the highest interest rate first. This will allow you to lower the amount you have to pay in interest the quickest. This approach will save you the most money in the long run, but it may be that you need the emotional victory of having paid off a debt free and clear. If this is the case, financial experts like Dave Ramsey advocate paying off your debts starting with the smallest, and moving up to the largest. If you have the discipline and the patience to wait for results, you might want to tackle the biggest debts first. Otherwise, it would be a good boost to your confidence to start with the small.
3. Use Credit Counseling Services
One way many people get their debt in order is by seeking the services of a credit counseling service. Such an organization will usually take a look at a person’s debts, income and other finances for free. That organization can then work with you to help solve your debt problems. These types of organizations should help you to create and follow a good working budget, and give you ideas of ways that you could make more money to pay off your debts sooner.
4. Consolidate Your Debt
One way to successfully manage your debt is through consolidation. Paying many separate debts can be very stressful. Consolidating those debts down into one monthly payment can make things far easier. If you wish to find a skilled debt consolidation attorney in San Antonio, one great place to look is the law offices of Jan Perry Lederer. A debt consolidation attorney can also help you avoid predatory companies in the debt consolidation industry who will have you pay more money in the long run, under the guise of shrinking your payment. If you are deep in debt, chances are you don’t need a smaller payment, you need a lifestyle change.
5. Debt Settlement
Debt settlement is a method that is saved for people that don’t have the ability to pay back all their debt in a five year repayment plan. This involves negotiating with creditors to reach a settlement on the debt that’s owed. The settlement will be less than the initial amount. Debt settlement will likely hurt your credit, but it could help as a last-ditch effort to prevent bankruptcy. Before you look to get out of your debts by settling them, try to take care of them in every honest way that you are able. When all other methods fail, and if you have enough cash on hand to pay off at least part of what you owe, this could save you from the pain of bankruptcy.
6. Bankruptcy
Lastly, there is bankruptcy. However, due to changes in the law, most bankruptcies for individuals now require that the debt be paid off in a repayment plan. Save this as a very last option after all other alternatives fail.
When you have a lot of debt, paying it all off can seem almost impossible. Thankfully, there are strategies you can use to help you solve your debt problems. With a bit of work, you will someday be able to live debt free.
Share this:
Category: Debt
