First and foremost, it is critical to understand that just as it took a while to amass your debt, eradicating it is also going to take some time.
There are no quick and easy solutions for dealing with debt. Even filing for bankruptcy protection, while it might take a minimal amount of time to enact, has lingering effects that go on for nearly a decade.
We’ll offer some proven strategies in this consumer’s guide to eliminating debt. Remember though, any debt solution you employ will require you to exercise patience, resilience and diligence.
First Things First
Create a list (or a spreadsheet—if you’re computer savvy) of all of your outstanding credit obligations. List them in order from highest outstanding balance to the lowest. Note the minimum monthly payment each one requires, as well as the rate of interest.
Next, make a list of all of your recurring living expenses. These include rent/lease/mortgage payments, utilities, food, fuel and the like. Total them all up. Then, list all of your sources of income and the amounts they bring each month (after taxes).
Add the total of your credit obligations to your monthly expenses and subtract that sum from your income. If you get a positive number, you’re in great shape. If you get a negative number, you're going to need to either find a way to make more money, eliminate some of your monthly expenses, or sell some things off to help you get your income and outgo in alignment.
Attack Your Debt Strategically
In cases in which you have more income than bills and expenses, you might consider changing the way you pay your creditors. Most people look at how much money they have to put toward debt every month and divide it equally among their creditors. As admirable as that is, it will take much longer to pay off your debts.
Consider one of these approaches instead.
Make the minimum payment on all but the debt with the lowest balance. Add the leftover money to the minimum payment you’d normally make on that debt. Repeat the process until it is paid in full, and then do the same to the one with the next lowest balance. Proceeding in this fashion means you’ll be paying more and more on each succeeding obligation, until they are all paid in full.
Another way to apply this strategy is to use it to pay off the debt with the highest interest rate first, then work your way down through them until they are all satisfied. This will usually cost less in the long run, but might take more time overall.
Seek Professional Help
While eliminating debt absolutely can be done on one’s own, seeking outside assistance can reveal approaches about which you may have been unaware. Credit counselors will look over your finances to see if there are ways to employ your income more efficiently to facilitate the eradication of debt.
They might instead determine the solution you need might be something like a debt consolidation loan, to reduce your monthly payments, lower your interest rates and get your debts paid off more quickly.
In some cases they might advise debt management programs wherein they’ll take over payment of your bills on your behalf, after requesting concessions form your lenders to make repayment easier to accomplish.
In more extreme cases, you might be referred to a debt settlement firm, which will ask creditors for major concessions, in exchange for one-time payments in full of the outstanding balances. Testimonials on Freedom Debt Relief vividly illustrate the effectiveness of this approach.
These are the most tried and true methods of eliminating consumer debt. Employ the one best suited to your circumstances— exercising, patience, resilience and diligence — and they will work for you.
