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debt help 101

Debt Help: Start Getting Out of Debt

By: kjmena


American consumers collectively owe over $11 trillion in personal debt. Whether you have a mortgage, student loans, a car payment, or credit card bills, most individuals carry some sort of debt. While many of these situations are both common and unavoidable, they become overwhelming when stacked on top of each other or when you experience a sudden loss of income. But there are actually quite a number of debt help solutions available to consumers. If you have debt but don’t know what to do about it, there are some basic steps to get you back on the path of financial security.

It’s important to remember that tackling personal debt takes a long-term commitment. As much as we’d like to offer an easy overnight debt fix, one simply doesn’t exist; unless, of course, you win the lottery. But assuming you’re working with the same tools as most other people, your best bet is to create your own debt relief plan. While this may seem like a daunting task, there are actually several simple, practical steps you can take on your own to get started. And if you still need help, you can always contact a reputable debt management firm to work on your behalf. But first, try taking these steps to start getting out of debt.

Analyze Your Debt

Before jumping into getting out of debt, first figure out how you got there. Did you have a medical emergency resulting in costly hospital bills? Did you lose your job and have trouble keeping up with your monthly expenses? Or did you simply overspend on credit cards? Tally up all of your outstanding lines of credit along with each one’s interest rate and minimum monthly payment to grasp the full picture of your financial situation. Don’t be nervous — once you understand the kind of debt you have, you can figure out the kind of debt help you need. You can’t change every circumstance that has occurred in your life, but you can take control of certain aspects of your everyday life. Get ready to get out of debt.

Negotiate Your Interest Rates

Your success here will largely depend on your credit and payment history and it never hurts to ask. Spending just a few minutes on the phone may potentially save you thousands of dollars in the long run, which is much easier than getting a raise at work! See if you can save money on your mortgage by refinancing. Even if you’re short on cash for closing costs, you can often roll them into the new loan. Talk with your mortgage lender or financial advisor to ensure that any new costs are offset by savings with your new interest rate. You’ll also want to consider how much longer you have on the loan, since refinancing generally restarts you at a 30-year mortgage. For student loans, consider consolidating or refinancing to lower interest rates and extend your payment term. If you have credit card debt, call the card issuer and ask for a better rate. This tactic can be especially successful if you are a long-term customer who has historically made payments on time. Another option is to transfer your credit card debt to a new card with a one-year 0% APR promotion. You can aggressively pay down this debt while enjoying interest-free payments for up to 12 months.

Create a Debt Relief Roadmap

Now that you hopefully have new interest rates and some lower monthly payments, redo your monthly budget to eliminate as much extra spending as possible. Much of this will depend on the spending habits you discovered when analyzing your debt. The most direct way to get out of debt is to simply increase your payments. This saves you extra paid interest in the long run, so think of creative debt solutions to pay down extra each month. Eliminate any spending that is not a necessity, including dinners out, trips to the movie theater, and lavish shopping sprees. Earn extra income by picking up an additional shift at work, selling something on eBay, or tutoring students on the weekends. By cutting costs and tapping into your entrepreneurial spirit, you’ll create a focused debt management plan that will quickly gain momentum. And who knows? You might actually enjoy the challenge of figuring out how to earn extra cash each month.

Target Your Debt Payments

If you have more than one outstanding loan or credit card balance, decide the best order for paying them down to get out of debt. Some debt help experts recommend starting with the debt that carries the highest interest rate, while others suggest paying off the smallest amount first so you can celebrate success early on. The truth is no one knows you better than yourself. If saving money on interest in the long run is motivating to you, then by all means start off by paying down your debt with the higher rates. If you need short term goals to stay motivated, then start from the smallest loan and work your way up. Personal finance is named that for a reason: you are an individual and it’s perfectly fine to tailor your debt help plan specifically to your own needs.

Get Professional Debt Help

There’s no easy debt fix and sometimes it’s simply too overwhelming to do it on your own. If you still need debt help after following the steps outlined above, don’t hesitate to contact a reputable debt management company. While some firms offer out-of-the-box packages for their customers, debt settlement companies offer personalized plans through highly trained debt counselors. Contact a debt settlement company to find out more about debt solution programs.

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