Nearly half of Americans report having no savings and carrying substantial debt. The average American household has nearly $10,000 in credit card debt, not including personal loans, student loans, and other miscellaneous debts. To get out of debt, you need a plan, and you need to execute that plan. Here are some steps you can take to get out of debt and stay out of debt in the future.
Getting Started
Before you can get out of debt, you need to know where you stand financially. To get a complete picture of your finances, gather your most recent statements for all loans and credit cards to determine how much you owe. You should also get free copies of your credit reports from AnnualCreditReport.com to check them for accuracy and to identify all debts. Make a list of all your debts: name of creditor, interest rate, balance, minimum monthly payment. Once you know where you stand, you can start creating a plan.
Reduce Your Interest Rates
High interest rates make it more difficult to get out of debt. Fortunately, there are a number of ways to lower the interest rates on your debts. For high interest credit cards, ask the card issuer to lower your rate. If that doesn’t work, consider transferring the balances of high interest credit cards to a 0 percent balance transfer card so you can pay them off without incurring additional interest. For loans, consider refinancing the loans or consolidating the loans into a larger loan with a lower interest rate.
Create A Repayment Plan
Creating a repayment plan to get out of debt is easier than you think. There are two commonly used methods for formulating a repayment plan. Some people focus on paying down the debts with the highest interest rates first so they will pay less interest over time. Others focus on paying down the debts with the lowest balances first. Make sure that your plan includes the minimum payments for all of your debts to ensure you do not incur additional fees while you are trying to get out of debt.
Don’t Be Afraid To Make Adjustments
Once your plan is set, you may have to make adjustments based on your financial needs. While it is important to stick with your plan until your debt is paid off, it is also important to avoid further financial hardship.
Don’t Be Afraid To Ask For Help
In some cases, your best efforts may not be enough to get out of debt. Under these circumstances, it may be best to ask for help from a credit counselor or other financial professional. They will help you identify areas of overspending and help you create a debt repayment plan that is financially feasible. While you may have to restrict your spending for a while, you will be thankful when your debt is finally eliminated.