Once you find yourself in debt, it may feel like there are no possibilities of fixing your situation. However, there are ways to eliminate your debt without having to opt for bankruptcy. Some options may take months, while others may take years. But you can pay down and eventually pay off your debt if you really try.
The following three steps can help you get out of debt:
Step#1. Take a Look at Your Current Finances. Your first step in getting out of debt is looking at the money you bring in each month then comparing it to your monthly expenses. In this process, you don’t want to forget anything. Use a loan payment calculator to help you figure this out.
Step#2. Look at Where You Can Cut Back. Once you’ve looked at your monthly income and have compared it to your expenses, it’s time to look at budgeting your money by looking at where you can cut back. If you don’t need something, stop. After you’ve determined where to cut back, you can set up a budget. Any purchases that fall outside of your budget are not allowed.
Step#3. Begin Calling Creditors. If you’ve found areas to cut back expenses and want to start paying back your creditors, you can call them to see what types of deals can be worked out. If you’ve fallen behind on payments, you can try working out payment plans that will stop your accounts from going to collections and hitting your credit reports for default. If you’re already in collections, you can contact whoever owns your account to see if you can work out paying a percentage of what you owe. There are bankruptcy friendly banks out there if you know where to look.
If you have tried to contact creditors to pay back debt, but you’re still having a difficult time working out a plan that will help you effectively pay off your debt, then it may be time to look at some outside help. Have you heard of “Get-out-of-Jail Free Cards?” Here are some:
Credit Counseling. Whenever a person considers bankruptcy as a way to pay off debt, they are redirected to a credit counseling service first to make sure that there aren’t other alternatives available. However, you don’t have to be headed for bankruptcy to obtain the best credit counseling agency’s services – it’s for anyone in trouble. Basically, the job of the counseling service is to analyze your debt, then come up with ways to help you pay it off. They may contact creditors on your behalf to create payment plans. Also, they will likely give you lessons on how to better manage your finances in the future. Credit counseling is not expensive at all and a good long-term option for paying off debt.
Consolidation Loans. When working with a consolidation company, they will pay off your creditors for you and consolidate your bills into one lump sum. Then you will make payments to the company and no longer owe your creditors separately. This is a good option because it very often lowers your total monthly payments by more than half. However, since the consolidation company has extended you a loan, you will have to concern yourself with interest, which is often front-loaded (meaning you pay interest before paying your principal). Make sure you compare debt consolidation loans and don’t sign up for the first choice that is available.
Debt Management. A debt management company works on your behalf to lower your debt; however, in their negotiations they will require you to pay back debt in one lump sum. Working with a debt mediator usually spans months because you have to take time to save. During this time you will probably be asked to stop paying your creditors. In the end, this type of arrangement can significantly increase your credit score; however, it may also lower first since you temporarily stop paying your creditors. Also, it’s good to keep in mind that debt management often requires you pay a hefty fee of up to 15% of your total debt. Debt help is always welcome if the company has a strong track record of helping clients.
Okay, so your “Get-out-of-debt” card may not be free (you still have to pay your debt), but you have to admit, it is very helpful. Anyway, by considering these often overlooked options for eliminating debt, you may just be able to use your “free” advice to ”free” yourself of creditors calling and negative credit scores once and for all.