Getting rid of debt is something that many consumers are struggling to do. Debt elimination requires more than making sure you pay your bills. In order to get rid of your debt completely, you need to devise a plan and stick with it. Willpower and financial planning can help you to realize your goal of eventually eliminating debt.
Budgeting
Budgeting your money requires you to list out your monthly obligations and expenses and compare them to your income. Prioritize your bills so that you pay the important payments, such as the mortgage, car payment and food, first. Then apply the excess money to paying off your debt. Arrange your debts in the order you want to pay them off. Apply any extra funds you have at the end of each month, including money freed up by paying off existing accounts, to the debts on your list, in the order you listed them. You can list your debts based on balances, interest rates or monthly payments. Staying within a budget means not incurring any new obligations until you have paid off existing accounts. Avoid new debt until you have addressed your existing situation.
Consolidation
Debt consolidation is the process of creating a single payment to take care of all of your high-interest debt. You can do this by using a personal loan or a home equity loan. If your credit does not allow you to qualify for a unsecured personal loan, you do not have the collateral for a secured loan and you do not have the equity in your home for an equity loan, consult a debt consolidation service. Start out by talking to your bank or your accountant about consolidation, because they may offer the services you need.
Credit Counselor
Some people do not have the ability to create budgets, manage their cash flow or talk to a debt consolidation representative. If you need professional assistance, talk to a credit counselor. A credit counselor will help you create a monthly budget and teach you how to pay your debt down with your own money. If you need to consolidate your debt to pay it off, the credit counselor can help you with that process as well.
Debt Negotiation
In debt negotiation, you contact your creditors and negotiate a pay-off balance for your debt that is less than what you owe. The creditor closes your account, and you negotiate a monthly payment with your creditor to pay off the negotiated balance. Debt negotiation is one of the least reliable methods of getting rid of debt because creditors do not have to accept your offer. If you are current on your payments or less than three months behind, your creditors will more than likely not accept a reduced pay-off. However, if you prepare your argument in advance, approach the situation with professionalism and be prepared to compromise on your negotiated pay-offs, you have a chance to get rid of your debt by making monthly payments on negotiated pay-off amounts.
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