Get Out of Debt
How to Handle Debt
Debt is a nightmare. It is the fastest road to economic slavery and for most of us, it’s very hard to eliminate once we have it.
The best and happiest way to live is debt free. Yes, I mean that. Absolutely free of any debt whatsover. Even the house. If you have no debt, you can do whatever you want. You can move, you can go out to eat without worrying, you can travel, you can even quit your job if you don’t like it. You are free. You call the shots, and that is the best way to live.
The best way to handle debt if you are in it, is to take it one step at a time. You need to slowly but SURELY get out of it. That being said, there are some strategies you can use to handle being in debt.
First, analyse your situation. Is your debt tied to an asset (a house, a car) or is it credit card debt? Debt tied to an asset is less of a problem than credit card debt, so lets handle them separately.
CREDIT CARD DEBT
Your options:
If you cannot handle the debts by yourself then:
You might need to talk to an agency that helps people with debt problems. There are two types of agencies. The first is classified as a consumer credit counselling agency where they will negotiate with the creditors and usually get them to lower the interest rate and lower the payments and change the payment schedule. Normally you end up paying the full amount owed, but with lower interest and a different payment schedule.
The second type of agency is classified as a debt settlement agency. These types of agencies can usually get your debt reduced and the interest lowered. The downside is that you usually have to pay a fee to the debt settlement agency for their services.
Both types of agencies have their place. You need to do your homework and find out which alternative is for you. Search in google for both consumer credit counseling and debt settlement agencies, compare the two and make an informed decision.
Learn More About Debt Settlement
Bankruptcy - Filing for bankruptcy is not as easy as it once was. It is never a fun alternative, but it is better than destroying your life. If you consider this option, always seek the advice of a reputable attorney. Here is what happens when you file for bankruptcy. You are required to appear in federal court for at least one hearing, maybe more. The bankruptcy stays on your record for up to 10 years. Bankruptcy is a matter of public record which means anyone can know about it. Sometimes there is a court appointed trustee to oversee your estate.
If you can handle the debt yourself then here are some suggestions to help you with the burden:
What you can do to reduce the cost of your debt is call the credit card companies and tell them you are having a hard time. Ask them to lower their interest rates. A lot of times they will because they would rather you not default on your payments.
Sell anything you don’t need or use thats lying around the house on ebay or in a garage sale. (You’ll probably get more for it at ebay). Use every penny of that to pay down your credit cards. There is no reason not to use ebay. Its easy and it works.
Pay off the cards with the smallest balance first. That way you will actually eliminate some and you will be motivated because you will see progress.
Get a part time job on weekends strictly to help pay down the cards. This is not fun, and no one wants to do it, but remember, you need to be very focused in getting rid of your debt so you can have a better future. By doing this you are working for your own future.
If you have a lot of cards, then absolutely get a debt consolidation loan or a home equity loan to pay off the debt, BUT you must absolutely not use the credit cards. If you do, then getting a loan will only make things worse because you’ll end up with even more debt.
If you pay the bare minimum amount to a credit card company, in addition to taking a very long time to pay it off, you might end up owing more than the original amount. The reason is because the credit cards usually have a very high rate of interest that is added to your balance. You should try to make payments greater than the minimums in order to pay off the cards as quickly as possible.
Keep in mind that this hardship won’t last forever. Maintain a mindset that lets you envision a future with no debt and keep that as your goal. Your hard work will pay off. Just keep at it and NEVER GIVE UP.
Debts tied to an asset such as a house or a car
These types of debt are different from credit cards (or unsecured debt) because the lenders are much less willing to negotiate on the debt since they have the loan secured by the asset. That being said, if you are about to lose the house to foreclosure, the bank may be willing to negotiate and work out a payment plan for you. Its not in the bank’s best interest to let you lose the house. However, bank’s aren’t stupid, either. In an appreciating housing market its much less likely they’ll negotiate. They will simply foreclose and sell the house. In a declining market, the banks may be more open to negotiating because they do not want to have to sell your house when nobody is buying. Ultimately, banks are not in the housing business.
The best advice is to talk to the lender and work with them. If you do nothing, you’ll lose the house, so it’s in your best interest to try.
If your situation is not so dire, then what you need to do is determine if you can lower the interest rate of your mortgage. If you can refinance the house, including closing costs and other fees, have a fixed interest rate and end up with a lower payment, then by all means do it. Here is a good option:
Home Equity Loans – No Costs! No Fees! Click here to apply!
If you are financially able, pay an additional amount each month on your mortgage. This will be applied directly to the principal and will reduce the total amount you have to pay drastically. If you do this regularly, the thirty year mortgage could be reduced to 20 years or less. If you have a 15 year note, then it could be reduced to under 10 years.
The bottom line is that by the time you retire you should own your house free and clear.
