If you’re looking for ways to get out of debt , chances are the words credit, money, struggles, embarrassment and frustration all come to mind. All of these words are closely related and come into play when your debt begins to pile up. Large amounts of debt aren’t a fix-now problem, they require a plan of action and dedication to bring the amount owed down to a manageable amount or, better yet, to disappear.
Regular, everyday people fall into traps of large amounts of debt. Once the bills start pouring in, it can become difficult to even look at the monthly bills, let alone pay them. Before you start trying to get out of debt, make sure you know where your credit stands and get your free annual copy of your credit report. Your credit report will show you your credit history and can prevent any surprises from coming up during the time you’re eliminating your debt.
Five common ways people get out debt include do-it-yourself debt reduction, consolidation, counseling, settlement and bankruptcy. These work in different ways; one is sure to work for you but it depends on your private situation.
A DIY reduction is ideal for people who are motivated to stick with a program on their own. You need enough cashflow to be able to pay off your balances in three years. Before starting this type of reduction program, you’ll need to make out a written plan.
Consolidation is when you consolidate all of your debts into one loan. This works if your consolidation plan significantly lowers your interest rates and allows you to make a manageable monthly payment that’s lower than the combined payments you’re making now.
Reputable credit counseling organizations allow you to make payments directly to them as they negotiate lower interest rates. Like with consolidation, you make one payment instead of several. They help you make a Debt Management Plan; creditors often lower interest rates when you’re involved in a DMP.
If you can come up with enough money to negotiate a settlement with your creditors, you may be able to pay off your debt for a fraction of what you owe. You typically need 30 to 50 percent of the total amount owed.
Bankruptcy is an option if you have significant debts that can be discharged. You need to meet certain income requirements.
All of these options should be considered if you’re looking for ways to get out of debt.