Find Out How Much You Owe
You wouldnt believe how much money people waste by skipping this step and blindly paying off any bills that come in with no strategic plan.
This boils down to the fact that people feel guilty about their debt. Theyd rather bury their heads in the sand than look at the reality of the situation and do something about it.
This is exactly what credit card/loan companies want for you to hide from your statement every month and just blindly send them the minimum payment thinking youre getting out of your debt. They LOVE it when you do that.
The reality is that minimum payments dig your hole even deeper.
It might be painful to learn the truth but you have to bite the bullet. Then youll see that its not hard to end this bad habit. In fact, you can get credit card companies to help you. Just look at the back of your credit cards for their number, call them, and ask them for the amount of debt you owe, the APR, and the monthly minimum payment on the card.
We challenge you now to step up and own your debt. You can do the hard work now, or the impossible work later.
Use this tool to track it . Itll help you find out how much you owe to each company and what your interest rates are.
Stop right now and do this.
Congrats! Taking the first step is one of the hardest parts now youre well on your way to a Rich Life.
If your total debt number seems high, remember two things:
Start Paying More Than The Minimum
If you’re only paying the minimum balance on your credit cards, you could be slowing your progress. Take the example below:
Payment Due Date : Nov. 18, 2019New Balance: $1251.20Minimum Payment Due: $25.00
LATE PAYMENT WARNING: If we do not receive your minimum payment by your due date, you may have to pay a late fee of up to $39.00.
MINIMUM PAYMENT WARNING: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:
|If you make no additional charges using this card and each month you pay:||You will pay off the balance shown on this statement in about:||And you will end up paying an estimated total of:|
Estimated savings if balance is paid off in about 3 years: $1,239
When only paying the minimum, you’d be paying off the debt for 10 years and that doesn’t even account for making new purchases. In this example, paying a little more than double the minimum payment would result in paying off the debt in three years while saving $1,279 in interest.
Take a look at your credit card statements and see if you can reduce the time you’re in debt by paying more than the minimum.
What Do I Need To Do Before I File For Bankruptcy
You have to get credit counseling from a government-approved organization up to six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved agencies at the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees.
Also, before you file a Chapter 7 bankruptcy case, you must satisfy a means test where you confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program.
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Tips To Get Out Of Debt Fast
When youre in debt, getting out can seem overwhelming. Depending on how much you have, it may even seem impossible. The good news is there are steps you can take to get out of debt quickly.
Steps to getting out of debt:
- Figure out how much debt you owe
- Know the details of your debt
- Pick a repayment plan
- Pay more than the minimum
- Lower your interest rates
- Create and stick to a budget
- Take advantage of found money
- Create an emergency fund
Stop Going Out To Eat
We get it. Going to a restaurant or hitting up the drive-thru is so much easier than making meals at home. But while youre enjoying the freedom of not having to cook for those picky eaters, youre spending way more eating out than you would by eating in. Instead, invite friends over for taco night instead of meeting up at a restaurant. And heyif you want to splurge for guac, we wont judge.
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Digging Your Way Out Of Debt In 8 Steps
Americans are buried in debt from mortgages, credit cards, personal loans, bills, and student loans, and the amount owed in total is on the rise. In 2020, Experian reported that the average American owes approximately $$92,727 in total debtthe highest amount on record in the U.S. Who’s carrying the most debt? Members of Generation X owe a staggering $140,643, followed by Baby Boomers and Millennials . This debt includes mortgages, student loans, credit cards, and other types of personal debt.
Chances are if you are reading this article, you probably have some debt in your name. And if you’re in a financial hole due to debt, the only real solution is to change your debt habits and start digging your way out, one step at a time.
Here are 8 ways to unburden yourself from the weight of your debt.
What Is Debt Settlement
Debt settlement programs are different from debt management plans. Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt.
The companies negotiate with your creditors to let you to pay a settlement, or lump sum of money thats less than what you owe to settle your debt. Meanwhile, you have to set aside a specific amount of money every month in a designated account until you have enough savings to pay off any settlement that is reached.
The process can take years to complete.
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Are Debt Consolidation Loans A Good Idea
Some of these loans require you to put up your home as collateral. If you cant make the payments or if your payments are late you could lose your home. Most consolidation loans have costs. In addition to interest, you may have to pay points, with one point equal to one percent of the amount you borrow.
Credit Card Balance Transfers
Just like debt consolidation, credit card balance transfers will only offer you a temporary solution. Sure, it might give you a little extra breathing room in your paycheck, but itll keep you in debt for longer. Why? Because youll be tempted to spend those extra dollars on something other than your debt. Remember, the only way to beat debt is by throwing everything you have at ituntil its gone.
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Whats A Debt Management Plan
After a credit counseling agency has thoroughly reviewed your financial situation, it might recommend that you enroll in a debt management plan to help repay your debts. Debt management plans are for unsecured debts like credit card or medical debts. They arent for secured debts like houses or cars.
In a debt management plan, a credit counselor sees if you and the companies involved can agree on a plan for how you will repay the money you owe them. Once a plan is worked out, every month you deposit money into an account held by the credit counseling agency. The credit counselor uses the money to pay your bills according to an agreed payment schedule. You dont stop paying until your debt is repaid.
Create An Emergency Fund To Avoid Future Debt
Saving money while trying to pay off debt may seem like an impossible task. But building savings is important to avoid slipping back into old patterns. A job loss, major medical bill or car repair can throw you for a loop. If you have an emergency fund to tap into, that can help you stay on track. Most experts suggest having an emergency fund that can cover three to six months worth of expenses. As you start to cut debts, you can reallocate some of that money into a savings account for emergencies.
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How To Get Out Of Debt Fast
Casey is a reformed sports journalist tackling a new game of financial services writing. Mike Francesa once called her a great girl.
At a Glance
In 2018, American household debt reached a record $13.21 trillion.¹ Americans under the age of 35 owe about $67,400 on average², with credit cards and student loans making up more than 40% of their debt.³ Here are several ways to get out of debt more quickly and help avoid getting into debt in the future.
In this article, youll find:
Pay Off Your Most Expensive Loan First
Your most expensive loan is the loan with the highest interest rate. By paying it off first, youre reducing the overall amount of interest you pay and decreasing your overall debt. Then, continue paying down debts with the next highest interest rates to save on your overall cost. This is sometimes referred to as the avalanche method of paying down debt.
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Is Debt Settlement A Good Idea
Debt settlement can be risky. If a company cant get your creditors to agree to settle your debts, you could owe even more money in the end in late fees and interest. Even if a debt settlement company does get your creditors to agree, you still have to be able to make payments long enough to get them settled. You also have to watch out for dishonest debt settlement companies that make promises they cant keep, charge you a lot of money, and then do little or nothing to help you.
Debt settlement programs also might encourage you to stop sending payments directly to your creditors. They are required to tell you that it can have a negative impact on your credit report and other serious consequences like late fees and penalties that put you further in the hole. You also could get calls from your creditors or debt collectors, or be sued for repayment. Depending on your states laws, if your creditors or their debt collectors win a lawsuit against you, they might be able to garnish your wages or bank account, or even put a lien on your home.
Depending on your financial condition, any savings you get from a debt settlement program could be considered taxable income.
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Mistake: You Decide To Stop Contributing To A Retirement Account
While it seems to make sense to devote every dollar possible to eliminating debt today, in the long run, its a costly mistake. Remedy: Contribute at least 5%-10% of your income to retirement savings as soon as you begin working and dont let eliminating debt cut into that. Time is the most powerful tool in retirement savings. The earlier you start contributing to a 401 or otherretirement fund, the better off youll be at retirement. Find other places in your budget to pay down credit card accounts.
The Debt Snowball Method
Want an alternative way to clear your debt fast?
The debt snowball method is another simple way to chip away at your debts. Rather than the biggest interest rate, you focus on your smallest debt.
With the snowball method, you make only the minimum payments on your other debts. Any extra money you can pay, chuck it all onto your smallest debt. Clear that one as fast as you can.
Then celebrate! You just cleared one debt.
Any money you were using to pay that debt is now freed up. You can now move onto the second smallest debt and pay more into that, clearing it faster.
Keep working this way, and youll gain momentum every time a debt is cleared. By the time you come to your final and biggest debt, youll be able to pay off more and more because you dont have other debts holding you back.
The great thing about this method is that it really helps you feel like youre making progress . Each debt you clear is another weight off your shoulders.
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Take Control And Take Action
Once you’ve taken the time to create a budget and develop a plan, it’s time to put it into action.
Whether you have chosen to make your own plan or are working with a credit counsellor, stick to your plan and be consistent. Try to make the minimum payments on all your debts by their due dates. When you do, any extra money you have from your budget can be put towards paying your target debt.
However, be realistic. If you cannot meet the payments you have set out in your plan, you may want to investigate alternatives. If you haven’t already done so, this would be a good time to involve a professional.
Remember, sticking to your plan may not always be possible depending on your situation. Getting out of debt is a long process. The trick is to try and take control of your debt before it becomes overwhelming.
Here are some additional resources and tools on debt repayment:
It’s My Debt I’ll Do It
Getting out of debt usually means making some painful decisions. If you’re simply too far behind, it might be time for some drastic measures. The softest cuts come in the form of substitutionone-ply for two, a walk in the park for a gym membership, a “staycation” over a vacation.
Harder cuts come in the form of selling whichever non-essential items you can live without. Any money raised from selling non-essential stuff should go toward a lump-sum payment against your highest interest loan.
Don’t close your credit cards when you are in debt. Closing cards reduces the overall amount of credit available to you and increases your , two things that can hurt your credit score.
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Many Hands Make Light Work
One wise step in the process of getting out of debt is to meet with a , though this option is much more helpful if you do it before you’re desperate. A credit counselor will provide many helpful tips and make sure that you’re on the right track with your repayment plans.
They may also provide support when you meet with your creditors, adding some professional weight to any negotiating you want to do. That said, be wary of credit specialists who charge high fees while churning through an equally large volume of clients.
Ways To Get Out Of Debt Fast
Creating your own get-out-of-debt plan truly is possible. With some fundamental changes to your lifestyle, you can get out of debt fast even with a low income.
However, turning around your financial situation doesnt happen without some work. It requires commitment, planning, and strong self-discipline. But luckily, it gets easier over time as you build better spending habits.
Dont wait to take back control of your life. There are many ways to get out of debt fast.
Get Help Now
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Paying Back A Consolidation Loan
Making the minimum payment on a consolidation loan will help you get out of debt eventually. However, the minimum payment on a line of credit will usually only cover the interest that you owe. You wonât get out of debt if you only pay this amount. Increase your payments if you can to help reduce your debt faster and pay less in interest.
A consolidation loan won’t hurt your credit rating if you make your payments on time.
Pay Off The Highest Interest Loan First
To get out of debt the absolute fastest, youre going to want to pay off the loan with the highest interest rate first.
For example, lets say Credit Card A has a balance of $1,000 and a 12% interest rate, and Credit Card B has $1,500 at 6% interest. You put down $150 total every month, paying the minimum payment on one and whatevers left on the other.
Youre going to save more money by eliminating Credit Card A first vs Card B . Once youve decided what you should prioritize, its time to come up with a plan of attack.
When it comes to your student loans, you can actually save thousands of dollars each year by paying down your debt more each month.
Yes, you read that right. You can save money by spending MORE.
Lets say you have a $10,000 student loan, at a 6.8% interest rate, and a 10-year repayment period.
If you go with the standard monthly payment, youll pay around $115/month. Like I said before, paying the minimum digs you into a bigger hole. Even $20 more per month can save you huge amounts of money.
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