Friday, April 6, 2012, AM | 1 Comment
The economy is still quite lagging, latest unemployment rate is above 8% and on top of that, credit market is still quite tight. Money has long quit growing on trees in America and else where as well. Credit was never cheap but it was readily available. For many folks, that was just enough.
They didn’t particularly care for the interest rate as such as long as someone was willing to give them money. I say giving because that’s what people thought of borrowed money as free money, as if they were never to return it.
As happened to millions, they turned out to be absolutely wrong. We live in America but money has stopped growing on trees. We all must realize this fact.
The following 7 ways to get out of debt are tough to put to practice. It’s not easy to cut out most options that one is used to in every day life but something must give way for us to have peace. Spending less than you make is pretty much the only way to reduce debt. But so many people don’t want to acknowledge this simple truth!
Many folks, who are heavily in debt, are afraid to face their debt and their bills. They keep fearing and not facing debt. They keep forgetting to pay bills. Instead they spend the money.
Use your Assets
You need guts of the utmost to not borrow. Instead use your own financial assets (intellect is one great asset). We all have assets, one kind or another and liabilities. The trick is to learn how to use the assets by discarding liabilities.
However, you just cannot sweep all your liabilities under the carpet. You need to develop a plan to increase your assets and reduce your liabilities.
You may be able to use your home and your car – if you own either or both – to get control of your debt. For example,
If you own a home…
You could get a loan against your home equity just enough to pay off your debts. You could be saving a considerable amount of money on interest if you pay off high interest credit card debt in return for lower cost home equity loan.
If you own a car…
If you have a car, consider selling it, paying off your debts and buying a cheaper car. Be careful though! You don’t want a cheaper car that will cost you a fortune in repair costs.
Get a Second Job
If you did get a second job, use the income from it to only pay off your debts. Use the income from your full-time job to pay your utilities and food etc. You can invest your saving to grow your money.
Put your Credit Cards on Hold
One of the best steps you can take is to immediately stop using credit cards. Don’t cancel your credit card accounts though. Cancelling them would lower your credit score. Keep only one card or perhaps two for emergencies.
Set up a Repayment Plan
Before you set up repayment plan, the best thing you can do is to control your spending thus saving more. Use the extra saving to pay down your debts. Pay off the debts with the highest rates first and work your way down the list.
Get a Consolidation Loan
A consolidation loan can make lots of sense. Get a loan to pay off all your many debts and have just one payment to make. The new loan usually has a smaller payment and a lower interest rate. Use the Services of a Credit Counselor.
In some cases you can make a proposal to your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating. This operates similar to a debt consolidation loan except you do not borrow the money to pay off your creditors.
You may be able to pay less than 100 cents on the dollar. For example, a relative may be willing to pay a lump sum to the creditor of say 50% of the amount owed in order for the balance of the debt to be written off.
If these alternatives will not work for you, bankruptcy may be the only way for you to get a fresh start. Bankruptcy offers a quick solution to getting out of debt. First time bankrupts are eligible to get out of bankruptcy (and have all debts written off, with some exceptions) in 9 months. More and more people in US are going bankrupt.
In a Nutshell
Follow the above steps and you will get out of debt eventually, perhaps sooner than you expect.