Best Way to Get Out of Debt

No one desires to live their entire life full of debts. It is for this reason that getting out of debt has become a common yet serious concern of individuals regardless of age, gender and status in life. However, getting out of debt is never easy. There are even individuals who have been trapped with larger amount of debts, making it hard for them to stand up and recover financially.

If you are in serious debt, you do not necessarily have to live with its shadows for the rest of your lives. There are still possible ways on how to get out of debt and change your life completely. The best thing to stop debt from recurring is to live within your means. However, there are really inevitable instances that you will run out of budget and will resort to borrowing money from lenders or other people who have the means to lend you the amount you are hoping for.

There are different types of debt but it is apparent that credit card debt is one of the most serious financial issues faced by many these days. It is true that getting out of this debt is challenging but when you think of the most suitable ways you surely can get out of the financial trap. Also, you need to keep in mind that rectifying your credit card debt or any type of debt as it is, perseverance and dedication is required. Here are some of the best ways on how you can get out of debt and start living a worry free life once again:

• Use Debt Management Program

Debt Management Program or DMP is offered by member agencies of NFCC or National Foundation for Credit Counseling. Once you enter to DMP, you agree to make smaller payments directly to the administrator of the plan who will then pay the issuers of your credit cards. In many cases, the rate of your interest is significantly lowered and the fees are also waived, making your payments considered on time even these are not large enough to create minimum contractual payment.

Debt Management Program may take years to settle or pay out, and this is one of the reasons why some individuals do not complete the plan. If you enter into this program, make all the necessary payments and then exit the program or plan worry free and debt free with solid scores and credit reports. The best thing about Debt Management Program is that you are actually paying off your financial obligations even without the help and assistance of bankruptcy attorneys and companies specializing in debt settlement.

• Use Personal Loans

Personal loans are unsecured installment loans. Even though you got good credit it is not really difficult to avail and qualify for a personal loan amounting to $10,000. If funds coming from personal loans are used in paying off debts such as credit card debt, your credit score will actually shoot through roof because you will be converting scores that will damage revolving debt to score light installment debt.

• Use Balance Transfer

If you have good credit, you are perhaps getting offers either zero or low percent credit cards. These are actually tempting for good reasons. Converting your costly debts to 0% interest debt is proven to be a considerable and favorable trade. Several credit cards allow individuals to transfer their entire accruing interest balances from other credit cards, enabling them to facilitate new purchases. The most notable thing about these purchases is that all of these are at zero interest at a given period of time. If you are disciplined, using the grace period is a brilliant option and this is normally between 6 to 12 months to attack balance aggressively and stay out of debt.

• Use Home Equity Line of Credit or HELOC

Home Equity Line of Credit or HELOC is the credit’s revolving line and this is secured by home equity. This line of credit can be used and tapped for any purpose such as buying a car, paying off debt, paying tuition and simply having an emergency fund. HELOC is typically used in paying off credit card debts since interests are tax deductibles and the interest rates are said to be relatively low. The danger in using this is during instances that you go to default. Since Home Equity Line of Credit is secured by home equity, the bank has the power of foreclosing your house in case you fail to pay back or settle the loan.

The ways mentioned above seems to be the best way of getting out of credit card debts. But generally speaking, there are still other ways you can execute to stay out of debt and get your life on normal track again. These ways are outlined below:

• Stop Adding Your Debts: If your credit cards are all maxed out, cut these in half. If you got more than one remaining card, cut them up also. When you are done you should have only one credit card remaining. As much as possible cut down convenience cards like department store or gas cards. Use only one card in purchasing emergency items or anything that you are able to pay for short period of time until you get your spending under control.

• Record Your Expenses: This idea is often disliked by some individuals without realizing that recording expenses is actually one helpful way of getting out of debt. You got so many debts probably because you are spending the money you do not even have. Debts may not come in just a huge and single purchase. These are actually considered as collective spending. Avoid additional debts and every day, write down every amount you spend no matter how big or small the amount is. After recording your spending, categorize it and prepare a budget.

• Determine the amount you owe, the terms and the person or lender you owe it with: Debts can sometimes be overwhelming because you lack idea on how much money you are really in. Gather all your debts and prepare a simple spreadsheet or list. Write down important and pertinent details such as the name of creditor, balance, required monthly payment, and interest rate.    

Use these tips to get yourself out of debt as quickly as possible. Getting out of debt and back on track with your financial health is very necessary to keep yourself sane over time.