Learn Debt Consolidation » how to get out of debt

Best Ways to Get Out of Debt

Shaun Connell — Fri, 28 Aug 2009 19:39:36 +0000

Unfortunately is seems it is very easy to get into massive amounts of debt, but nearly impossible to get out of it. The best ways to get out of debt take a lot of hard work and determination on your part, but in the end the feeling of freedom that you have will be well worth the effort you make.

It is recommended that you first make a list of exactly how much you owe. As daunting as it may appear on paper, you need to have it listed. Also list your income on a monthly basis so you know what you have to work with.

If necessary, get a second job. Keep the amount of money out of your check for basic needs such as food, shelter, a car payment, (so you can get to that second job), and any other things that you absolutely have to have to survive. This doesn’t include expensive cable and/or cell phones. Try to cut down on every un-necessary item on your list of bills. If you have to seek further employment, try to keep the money you make from the second job to use only for paying off your debts.

After making a list of the debt you owe, choose the items that have the highest interest rates to try to pay off first. Always send in more then just the required amount. It may seem like it takes forever to get the first bill paid off, but when you finally get to scratch it off the list, it will motivate you to keep trying.

If you have a second car that isn’t used often or isn’t really necessary, sell it. Not only will it lower your basic monthly bills like insurance, gas and upkeep, you can use the lump sum you get the it to pay off a whole bill. If you own your home, look into getting a second mortgage.

Quite often you can consolidate al of your bills into one affordable payment by getting a loan on your house. Make sure you speak with a credit counselor first though, to be sure it is the best thing for you to do, and that company you choose to deal with is on the up and up.

One of the best steps you can take to get out of debt is to immediately is also to stop using credit cards. You may wish to keep one that has a low interest rate in case of an emergency, but get rid of the rest of them.
If you absolutely have to, make use of a credit counselor, but be very careful in choosing which you use. Check with the Better Business Bureau before hand.

Unfortunately there are too many shady companies claiming to be there to assist you to get out of debt, but they will only make things worse in the long run. There are two types of credit counseling companies. One states it is for profit with the other being a not for profit. They provide basically the same services, and most charge a fee either way, so it is best to chose wisely if you need to procure this option.

In some instances you can set up a payment plan with your credit card companies that allow you to keep a good credit score, but you won’t be able to use the card once you sign the agreement.

Whichever way you feel is the best way to get out of debt, remember to work hard and be patient. Given time and practice you can relieve yourself of all excess debt.

Are You Making These Debt Mistakes?

Shaun Connell — Sun, 23 Aug 2009 14:18:13 +0000

These days you need good credit for everything from renting an apartment, getting a job, even to get satellite cable. Avoiding debt mistakes is so much more important to you than you might think. Staying out of the debt traps can keep your credit rating up and that will save you a lot of money.

Probably the biggest debt mistake that people make is getting too many credit cards. Having more than two credit cards can dig you into debt faster than anything If you went through a company that offers cards to people with poor credit, then you are paying a higher interest rate for a much lower credit limit than people that have good credit. If you make a payment late, your interest rate goes up, sometimes as much as twice what you were originally paying.

And let us not forget those late and over limit fees. If you make this debt mistake, you could make the minimum payments for as long as it would take you to pay off a mortgage, and still not have touched the principle balance due.

Major purchases will sink you as well. If you have bad credit and need a car, you will pay more for it and pay a much higher interest rate. Many times you and up with a car didn’t want because many car dealers unload the cars that they can not sell to anyone else to the people with bad credit.

This debt trap will ensure that you end up paying a fortune for a car that you will be stuck with. You will end up paying twice its worth, and never be able to get out of that trap because it will never be worth what you owe. Trading it in for another car will just compound the problem as the amount you owe above what its worth will be added onto the end of the next loan and put you farther into debt.

These debt mistakes can cost you a fortune in the long run. The bottom line is that is costs a lot more to be broke than it does to have money. Remember, if you can not pay cash, you probably can’t afford it. Use credit cards for emergencies only and pay them in full and on time to avoid interest and fees. Build up good credit before the major purchases and stay within your budget and let your good credit save you money.

The Best Ways to Get Out of Debt

Shaun Connell — Fri, 21 Aug 2009 18:31:26 +0000

The best way to get out of debt is to stop making new debt. Creating new debt while paying off old debt is like digging a hole and trying to fill it at the same time. The first step to not creating more debt is to create a budget. Not a “how I spend my money” budget like everyone tells you to do but a “how I must spend my money” budget like you should do.

See all those old bank statements you have lying around? Throw them away. The money is gone. Let it go. That is the past. Now you’re moving forward and being smart with your money.

The first step to your “musts” budget is finding all your bills for the current month whether you’ve paid them already or not. If you don’t pay your bills bad things happen. So itemize them in a list with the minimum amount that is owed this month ordered by the day of the month they are due.

Split them into two periods: the 1st through the 14th and the 15th through the end of the month. Add up the total bills you owe each period. If you are paying at lot more in one period than the other see if you can adjust when you pay the bills to balance it out more.

Now you know exactly how much you “must” spend each month and when all the money is going to be taken out of your bank account. The second step is to figure out how much you are paid in the two bill periods.

Add up all the income you make from the 1st through the 14th and from the 15th through the end of the month. Subtract the amount you must pay from the amount of money you make in each period. If it turns out you make more than is needed to pay the bills each period you are not broke. You are wasting money.

Now, all you have to do is make it through each day without spending money you don’t need to be spending. Take at least some of the extra money and make extra payments on debts Pretty soon your debts will be paid off and you’ll have even more extra money each month.

All because you stopped creating new debt and maybe even found some bills that you could do without or reduce. Like cell phone contracts and overpriced cable service.

Once you stop adding new debt you can move on and focus on paying off your debt consolidation loan, your credit card debt and work towards getting out of debt completely.

Stop Adding to Your Debt

Shaun Connell — Sat, 09 May 2009 03:27:59 +0000

One key part of getting out of debt is paying off your existing bills. But, many people forget another crucial component that can keep you in debt – taking on more debt.

As long as you keep making new charges on your credit cards or taking on new loans, your debt load will never go down. If you want to become completely debt free, you have to stop adding more debt. Here are some things you can do that will help you stop adding more debt.

1. Live below your means.

Living above your means happens when you spend more money than your income allows. Though it sounds physically impossible, it can be done using credit cards and loans. That type of lifestyle can be hard to break and takes some serious adjustments.

To bring your spending under control, you have to take a hard look at where you’re spending money and cut back tremendously.

2. Be comfortable with the lifestyle your income can afford.

The Hiltons have replaced the Joneses when it comes to coveted lifestyles. Many people live outside their means because they aren’t comfortable saving up for the things they want, or can’t manage to simply live without them. There will never be a shortage of wealthier people to imitate.

To stop adding new debt, you must be be happy with the things your income can comfortably afford and stop wanting to be like the people you see on tv.

3. Don’t let other people use your credit.

Not only do you have to stop taking on new debt, you have to stop letting other people get debt in your name. If you co-sign a loan, you’re responsible for the debt if the other person doesn’t pay. New lenders will treat the debt as if it were your own, considering it in your debt-to-income ratio to approve your own applications.

If you can’t afford to pay the debt yourself, then you can’t afford to co-sign it.

4. Get a supplemental income to make ends meet.

When you have trouble affording your regular monthly expenses, the answer isn’t to use a credit card to buy the things you need. Instead, you should focus on increasing your income so that it’s enough to pay your bills.

If you can’t possibly make anymore money, then try to decrease your monthly expenses so they fit within the money you currently make.

5. Get help with your medical bills.

Medical debt is one of the leading causes of bankruptcy, even among people with health insurance. Rather than let your medical debt pile up, be proactive about your bills.

When you receive a medical bill that you can’t afford to pay, contact the billing department immediately to discuss payment options. There may be some hardship programs that can forgive all or some of your medical bills.

Use www.benefitscheckup.org to find programs in your area that can help you pay your medical debt.

6. Get smart about how much debt really costs.

A little bit of shock therapy might be the thing you need to stop your debt habits in their tracks. Debt is an expensive habit to have and you’ll be better off financially without it.

Debt costs money. For example, a $5,000 loan at 6% for 5 years, would cost about $661. The more you borrow and the higher your interest rate, the more it costs to borrow.

When you’re tempted to take on more debt, think about how much it will cost. That can help deter you from new debt.

7. Cut up your credit cards.

If you don’t have the discipline to stop using your credit cards, the next best thing is to destroy them. You can cut them up, shred them, or burn them with a blow torch. The key is to make them unusable. That way you won’t make any new charges no matter how tempted you may be.

Even if you cut up your credit cards, you can still make internet purchases by typing the credit card number. You may have to cancel your credit cards all together if that’s what it takes to keep you from accumulating more debt.

8. Put a credit freeze on your credit reports.

Desperate times call for desperate measures. If you want to stop adding new debt, make it hard to get any debt. Putting a credit freeze on your credit report costs about $10 per credit bureau unless you’ve been a victim of identity theft in which case it’s free.

In exchange, there’s a sort of lock on your credit reports that keeps lenders from checking your credit. Without your credit report, lenders will deny your application, leaving you without a way to access more debt. You can take off the credit freeze, but it costs a fee each time and must be done a few days in advance.

Will it be worth the trouble just to get another credit card? This method isn’t 100% foolproof since there are some lenders, like your family, that don’t do credit checks. In those cases, you just have to be able to say no.

9. Seek help from Debtor’s Anonymous.

You may have a problem with “compulsive debting” if you habitually borrow things and don’t return them, you shop compulsively, you live paycheck to paycheck, or you get a feeling of acceptance whenever you use a credit card.

Fashioned after Alcoholics Anonymous, Debtor’s Anonymous has a 12-step program to help compulsive debtors create healthier debt habits. It starts with admitting that you have a problem with debt.

To find out more information about compulsive debting and find a Debtors Anonymous group near you, visit www.debtorsanonymous.org.

Now What?

To stop taking on new debt, you have to figure out why you keep accumulating it in the first place. That way you can fix the problems that you coverup by with debt. It’s the best way to stop adding more debt — otherwise, you’ll never conquer your problem.

It won’t be easy. It’ll require a change in lifestyle — but you can do it.

After you stop yourself from going into more and more debt, the next step is to lower your interest rates. Stay tuned — an article is coming that’ll explain exactly how to achieve this.