How to Best Get Out of Debt

The best way to get out of debt is whatever works for you. All debt situations are different, and the best solution for one person may not work for another. The major advantage to getting out of debt is clear: doing so saves a person potentially tens of thousands of dollars in finance charges. For example, making only the minimum payment on a $9,000 credit card bill will require 32 years of payment to pay the bill off --- including $22,000 in finance charges, according to DrPhil.com.

Instructions

1

Eliminate most discretionary spending and use the money to pay down debt. Cutting out cable television could result in savings of $1,200 a year or more --- enough to possibly pay off one or two credit cards with credit limits of several hundred dollars. Cut back on other discretionary spending, such as weekend getaways and hobbies, for even greater savings to apply to debts.

2

Conserve energy at home to reduce heating bills, and apply the savings to debt reduction. If possible, cool or heat only certain parts of the home to save money. Also, reduce money spent on gasoline by car pooling and consolidating trips for errands.

3

Refinance mortgage and automobile loans, if possible, to secure lower interest rates. Also ask credit card companies for lower interest rates if you carry balances on cards. Paying less in finance charges will help reduce your debt.

4

Chip away at credit cards with large balances by making biweekly payments. Making the minimum monthly payment twice a month could could help pay off a $9,000 credit card bill in less than 16 years instead of 32 years if you make only one minimum payment a month. Biweekly payments allow you to make 26 payments in a year, instead of 12 if paying monthly.

5

Enroll in a debt management plan if you need help getting out of debt. Nonprofit credit counselors such as those affiliated with Consumer Credit Counseling Service offer debt management plans for a monthly fee. They'll help you set up a monthly budget and will pay all of your unsecured debts, such as credit cards, using money provided by you each month. Find a credit counselor in your area by seeking a referral from the United Way or another major local charity.

6

Choose self-directed debt settlement or bankruptcy if your debt is completely out of control. Debt settlement allows you to pay off unsecured debts for less than the full balance. Bankruptcy eliminates credit cards and similar debt in as little as a few months. However, debt settlement and bankruptcy severely harm credit, and are best avoided.