Simple Strategies to Get Out of Debt

You do not need to take extreme measures to get out of debt. Today, many borrowers look for immediate solutions through refinancing or settlement options. While these options are often times necessary, they also come with penalties and costs not all borrowers need to subject themselves to. If you can get out of debt the old-fashioned way by simply repaying what you owe, you will be better off in the end than if you go through a debt modification program.

Budget All Debt Payments

Budgeting is a simple concept most borrowers learn at a young age. Despite the fact that most people know what budgeting is, very few actually employ the practice effectively. Today, the average American has over $4,000 in credit card debt alone. This shows how ineffective most budgets are. Start budgeting by making your debt payments a number one priority. After paying your rent or mortgage, any payments you have toward a car loan, credit card, student loan or personal debt should be the next priority in line. Do not allocate a single dollar to luxury expenses until you have set the payments you will apply to reduce your debt each month.

Pay High-Interest Debts First

Your debts are your first priority in your budget, and your high interest debts should be the first priority among your loans. Typically, credit cards have the highest interest rates of any loans. Do not allocate funds to your credit card just to find you missed a car payment. Instead, ensure you have met minimum monthly payments on all debts, and then allocate extra money toward the debt with the highest payment. Reducing this balance to zero is the first priority. Then you can begin reducing the next highest interest loan balance.

Contact Lenders for Extensions

Since you cannot rush to pay back debts that are not a priority, you will want to make sure you have ample time to repay them. Contact the lenders immediately to discuss payment plan options that will buy you time. This is an option with utility companies, heath care facilities and other entities you may be indebted to. These organizations will not offer an extension unless you ask. Describe your current fiscal emergency and explain that you can continue to make monthly payments for a given period of time but cannot pay off the debt immediately. You will likely find the organizations will work with you because they are most concerned with ultimately getting paid instead of getting cash right this minute.

Stop Additional Debts

The best-laid plans will never work if you continue to take on new debts. When you reduce a credit card balance to zero, close the card. When you pay off your home equity debt, close the line of credit. Maintain only the minimum limits you need for an emergency. There is no penalty for not having enough credit cards. The penalty for having too much debt, though, is high. Particularly if you have had debt problems in the past, opt for the first method and simply live debt free whenever possible.


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