Feeling overwhelmed by debt is becoming more common in the United States. Fortunately, there are several ways for people to get out of debt without having to declare bankruptcy. The key to all of these methods, however, is to find additional funds to pay off the debt.
Before starting to get out of debt, a consumer has to know how much debt he or she is actually in. To do this, a consumer should gather together his or her latest statements from all of their loans. Be sure to include any loan that is currently owed; even ones that the consumer is delinquent on. From these statements, make a list of all debts that are currently owed. Write down the total amount owed, interest rate, and minimum payment due every month.
Using this list, develop a budget that allows the consumer to make the minimum payments on all of his or her debt. Getting up to date and making timely payments on debt is the best way to qualify for loans with better interest rates and terms. Furthermore, once this budget has been created, it will be much easier to choose which loans that any extra money that comes in should be applied to. This budget will also give the consumer an idea of how much money he or she will need to get out of his or her debt.
There are two main ways of paying off debt quickly. The first one is to refinance all of the consumer’s debts into one loan with a lower interest rate and better payment terms. The second way is to earn a smaller amount of extra money each month that can be applied towards the debt. Both of these methods can get a person out of debt quicker.
Refinancing debt will rarely get rid of the principal, but it can reduce the amount of interest that a consumer pays and their monthly payment. BY continuing to pay the same amount towards the debt that a consumer did before his or her refinancing, it is possible for a borrower to get out of debt months or years earlier than they would have otherwise.
Refinancing can happen in a variety of ways. The simplest way is to find a credit card with a lower interest rate or better payment terms, then transfer the consumer’s existing loan balances to the new card. Many people continue to transfer their loan balance from card to card as promotional, zero interest offers expire and new cards offer the same or better offers.
Home equity loans and lines of credit can also be good ways to refinance debt. These loans use a person’s house as collateral, but also offer lower interest rates than most credit cards. In addition, these loans offer the consumer the ability to lock in their interest rates and monthly payment so that a consumer can have a steady budget.
Coming up with a way to get extra money every month is a little bit trickier, but it can be much more effective to get a consumer out of debt faster. Consider taking a second job or reorganizing a budget to free up extra money that can be applied towards the debt repayment. There are also some programs offered through various employers that help employees pay off their student loan debts and mortgages.
Refinancing a consumer’s loans, combined with earning extra money to apply towards debt repayment is the quickest way for a consumer to get out of debt quickly. While these methods require a lot of work, they will result in a consumer who no longer has to pay off their debt.