How to Get Out of Debt
It is almost impossible to get out of debt for folks trapped in the debt web. My day job involves writing articles and promotional material for credit card, debt consolidation loan and payday loan companies that encourages Americans to apply for these services which only leads them into more debt. I have always felt quite guilty about having to write this because I know for sure that these services are real harmful and can only lead to a person getting further caught up in the debt trap. This is why I have written this blog post on 'how to get out of debt' - to advise folks on how to get out of debt and to clear my conscience.
1. The first way to get out of debt is to pay back more than the minimum amount on your credit card. The faster you repay the amount, the less interest you pay and the more you save. Start with paying off the highest interest credit cards first and then move on to the lower ones. If you have a credit card for a long time you can call up the company call center and ask them to lower your interest rate and other charges. Everything is negotiable - you can also threaten you may have to declare bankruptcy and get them to lower your charges, after all it is better for them to get something rather than nothing. ( this is what debt consolidation firms do) . Save as much money as you can by giving up on luxuries and find the money to make the payments.
2. Another way to get out of debt is to pay back all your outstanding balances ASAP - cash out all your savings, investments in mutual funds, stocks and other investments and use the money to pay the outstanding debts. This is because the debts usually eat up more interest than your investments pay you. It is best to get rid of the debt first and then save up some more which you can invest later.
3. Don't be ashamed to borrow from family and friends - you'll get the money just because you share the same genes or for love. The borrowed money is usually interest free and there are no late charges if you fail to pay it back on time as promised. But remember to get out of debt, you may have to do other stuff to help them out like babysitting, picking up kids etc. which is not that bad considering your debts are paid off.
4. Get rid of your credit cards - as soon as you finish paying back the debt of a credit card, cut it up and destroy it so you are not tempted to use it again. Soon you will have just one credit card remaining, lock that up in a box and open it only in case of an accident or death. A good way to get out of debt is to stop credit card companies from calling you with new offers by dialing 1-888-5-OPTOUT. Here you will get the neccessary information to stop your contact information from being sold. For all other purchases use a debit card - this is to make sure you only spend what you have and only buy what you need.
5. The best way to get out of debt is to Save money - Don't buy things you don't need. Live way below your means till your debts are paid off. Things you can save a lot on are -
(a) Food - skip eating out at restaurants or ordering takeaway. Cook and eat home food only, it's healthier. Miss a meal or skip dessert - you can even lose a lot of weight this way. Stop buying coffee, tea, smokes or alcoholic drinks - they cost quite a lot per month and only leads to bad health, for which you would have to pay for later at the doctor's. Drink plenty of water instead of coke or other soft drinks, you'll get a healthy glowing complexion and also save a lot of cash.
(b) Transport - try and use public transport. Get out of debt by walking or riding a bicycle, if your office/mall is nearby. You'll save a lot on fuel and get a free workout that will lead to a shapely, healthy body. Maintain your car well so that you can get a good price when you sell it later and use it only for long distance travel which is absolutely neccessary.
(c) Shopping - make a shopping list and stick to it. Don't bother about commercials or brand names, choose the cheaper item off the shelf. You may be thinking, ' Oh ! what if Mr. Smith sees me', trust me, people are too bothered about their own problems and nobody cares a damn. Save coupons and buy in bulk cause it costs less and can get you out of debt real fast. Don't buy unneccessary things that are currently considered the cool 'in' thing to have - you'll see that after some time it will serve no purpose. Don't buy a new television or sofa set if you have one that is in a ok condition. NEVER BUY ANYTHING ON CREDIT. If you can't afford it, skip it and think about buying the newest model at a cheaper rate at a later date when you have the money.
(d) Utilty Bills - save gas, water and electricity. Use lights and heat only if you are in the room, don't keep them on in every room or on during the day. Use only one phone, call less.
(e) Other things - forget about donating money to charity, you need it the most. Anyway most of the money just goes into the pockets of social workers and hardly ever reach the folks they are meant for. Another way to get out off debt is to stop splurging on clothes, cosmetics, spa's, hairdressers and fitness centres. Also avoid going to amusement parks, vacation, holding parties etc. until the debts have been paid off and you have some savings. If a wedding is neccessary, have a real low budget one and invite a few friends only - take a few photos and you'll have great memories.
6. The worst thing you could do is to take another loan to pay off your debts or transfer credit card balances to a new card with a lower interest rate. Don't borrow against life insurance policies, 401 k retirement plans or take home equity loans. This may seem ok in the short run, but remember that this is just another loan and comes with an additional interest rate and extra charges too. Many are just introductory offers, and charge a higher rate after some time and can take ages to get you out of debt.
7. Filing for bankruptcy should be the last resort to get out of debt - It should not happen if you follow the above points. Filing for bankruptcy may seem the easy way out but there are many disadvantages to this. You could go to jail, have to pay through your nose for a lawyer and court fees, your relationships could breakdown and a lot of stress. What's more your credit score will decline and you may never get a loan again in your life. Plus you lose quite a lot of property to pay some of the debt. Some payments still have to be made even after filing for bankruptcy like alimony, child support, taxes, unlisted loans and student loans.
So instead of wasting time searching online for cheap credit cards, debt consolidation or payday loan sites, why don't you make a list of your debts and call the companies to reduce your interest rates. This will go a long way in reducing your burden and you can get out of debt real quick. Take this from someone who actually sells these services !
I hope this helps you in your quest to get out of debt. If you need any more information email me at email@example.com or post a comment at my blog.