Whether you’ve made irresponsible financial choices in the past, or you’ve dealt with a financial hardship, daily battling enormous credit card debt and other loan balances can wreck havoc on your peace of mind. You might lie awake at night or feel that your situation is hopeless.
Debt is comparable to a nagging headache that doesn’t go away. And unfortunately, paying just your minimums each month will not eliminate your balances quickly. Even worse, if you do not have enough money to pay your minimums, and you default on loan payments and credit card payments, creditors may harass you and call your home multiple times a day.
But regardless of whether your debt issues are small or large, there are ways to get from under this cycle. The Federal Reserve estimates that the average US household has about $15,000 in credit card debt. Given the high cost-of-living and the fact that some people cannot find employment, paying off balances proves challenging for some people.
However, this should not discourage you from trying. The truth is, there are practical solutions for debt. You might not be able to get rid of balances overnight, but if you stick with a plan, you can eradicate your balances within the next few years.
#1. Negotiate a lower interest rate
The interest rates on your credit card influences how long it takes to pay off balances. If you’re paying a higher rate, the majority of your monthly payments will go towards the new interest charges. Therefore, call your creditors and negotiate a better rate. For this to work, your monthly payments need to be current. In some cases, the creditor may only temporarily reduce your rate. Take advantage of this and increase your monthly payments during this period. If you make higher payments and stop using the card, you can put a serious dent in your balances.
#2. Prioritize
Getting a handle on debt will require prioritizing your expenses. You need to decide what’s important; where your money goes and what you don’t need to purchase. Sometimes, getting out of debt can be as simple as modifying your monthly spending plan. The less you spend each month, the more money you’ll save. As a result, you’re able to increase payments to your creditors.
#3. Look into debt settlement
Consider working with your creditors and settling your balances for less than you owe. Although a debt settlement can have a negative effect on your credit score, it might be a solution if you don’t have other alternatives. Negotiating for less than you owe can get rid of debt faster, giving you the opportunity to make a fresh start and rebuild your credit history.
Debt settlement is a lengthy process, and it’s important that you get this agreement in writing. This way, your creditor will not come after you for the remaining balance in the future.
#4. Consider a bankruptcy
Although some people discourage filing bankruptcy, wiping the slate clean is one of the best ways to deal with debt when you’re in over your head. To better understand the process, it’s best to speak with a professional bankruptcy attorney and ask questions. Depending on your situation, a judge may eliminate all of your debts, or require that you repay a percentage of your debts over several years. In either case, bankruptcy attorneys ensure that filing bankruptcy can stop creditor harassment and provide the opportunity to rebuild your credit history.
Right now, it may seem as if you’ll never pay off your credit card and loan balances. However, there are plenty of ways to deal with credit cards, loans and other types of financing. Explore various options available, and then choose the solution that’s best for your situation.