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Six Ways to Get Out of Debt That Really Work

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					Six Ways to Get Out of Debt That Really Work
If you’re carrying credit card balances you need to focus on paying them off as fast as possible.
Here are several ways to get out of debt as fast as possible depending on your budget. Budget is
the most important consideration when determining the which way to get out of debt best meets
your needs.


Snowball method
List out all of your debts and put them in sequence from the smallest balance to the largest
balance. You’re going to focus on getting the smallest balance account paid off first – this is your
target account. Pay only the minimum monthly payment on all of the other accounts. If you have
extra funds to add to your debt payments each month they should only be added to the target
account. If you don’t have any extra funds, then you need to cut some expenses to free up some
extra funds each month, even if it’s only $5 or $10 per month at first. Once your target account is
paid off, you add what you were paying on that account every month to the minimum payment
for your new target account (the account with the lowest outstanding balance at that point).
Every time you pay off a debt the extra amount you’re paying on the target account each month
gets larger and larger. This is the best way to get out of debt fast if you have enough in your
budget to add to your minimum monthly payments.


Debt Consolidation Mortgage
While this is a way to get out of credit card debt, it doesn’t reduce your overall indebtedness.
You are simply moving the unsecured credit card debt into a refinanced first mortgage or a home
equity loan. If you get into trouble and can’t make your payments your home is at risk. It is very
common for people who do this to end up back in credit card debt within a few years because
their credit cards have available balances on them. Don’t use this method if you don’t think you
can keep your spending under control.


Unsecured Debt Consolidation Loan or Balance Transfer
Like the mortgage solution, these solutions do not reduce your overall indebtedness. You’ll pay
off the credit card debt you had when you applied for the loan, but you’re left with the same
amount of debt (or more) in a different account. You also leave your credit card balances open
once they’re paid off by the loan or the transfer and this leaves you the temptation to use them.
Don’t use this method if you can’t control your spending.

The big differences between this and the mortgage method is that you don’t have to own a home
or have equity in your home and the interest rates will generally be higher than the rates for a
mortgage. It’s important to do the math on the loan fees or balance transfer fees and the interest
rate to make sure that you actually come out ahead on this one. Sometimes you won’t, the fees
plus the long term interest might add up to more than you would have paid if you’d just left your
credit card balances where they were.
Debt Management Program
This kind of program is a good way to get out of debt for someone who has gotten behind
temporarily, is able to pay the normal payments but can’t get caught up. When you join a
program like this your credit card accounts are closed and you pay the debt management agency
a set payment every month, which they use to make your credit card payments. These programs
can get you a lower interest rate or eliminate late fees and a few other things. Your credit card
debt can get paid off a little faster this way than making the minimum payments. If you haven’t
fallen behind the snowball method is a better way to get out of debt than debt management
programs.


Debt Settlement Program
This method of consolidating credit card debt is generally good for folks who have a financial
hardship and can’t make their payments. They want to get out of debt but don’t want to declare
bankruptcy. They’re not typically concerned about the ramifications to their credit report because
their hardship prevents them from making their payments on time anyway. Here’s how it works
– you put money into a “settlement account” at a bank each month and you accumulate the funds
there until you have enough to do a lump sum settlement on your first account (usually 30-50%
of the balance) . You negotiate a settlement with that creditor and that credit card debt is wiped
out when the settlement is paid. You repeat the process of accumulating funds and negotiation
settlements until you’ve paid off all your credit card debt.


Bankruptcy
If you want to wipe out credit card debt once and for all you could do it through bankruptcy. You
need to have a financial hardship and you have to get some credit counseling. A bankruptcy
attorney can tell you which type of bankruptcy you qualify for. Once your bankruptcy is
discharged you are no longer liable for the debts, they’re wiped out. Bankruptcies stay on your
credit report for 10 years.

There are several ways to pay off credit card debt fast. Your budget determines which one is
appropriate for you.

				
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Description: Six commonly used ways to get out of debt. Your budget will determine which way is right for you.