Getting Out Of Debt

Transfering Funds, Negotiating, Budgeting

Getting out of debt is certainly a worthwhile goal. Get the help you need here, and have peace of mind and much less stress.

Repay Your Debts

You understand of course that it's better to get out of debt, if possible, than it is to go bankrupt. You can maintain a good credit score by eliminating debt, which is obviously a better alternative to bankruptcy.

Here are some tips for getting out of debt...

To pay off your debts, you first need to determine how much money you can put towards your debts each month.

Create A Budget

Create a list of your monthly expenses; in other words, a budget.

Once you have your budget in writing, you can decide what expenses you can cut to free up more cash for getting out of debt. Read about budgeting on my page Household- Budgeting.

• Always try to pay more than the minimum, so that more of your money is going towards the principal. By paying only the minimum, your money is mainly going towards the interest.



• Pay off your debts with the higher interest rates first. If you have an extra $50 in a given month, put it towards the debt with an 18% interest rate, rather than a debt with a 10% rate.

Transfer Funds

Transfer some, or all of your balance, from a high interest rate card to a low interest rate card.

Consider borrowing from friends or family; if they have a good credit rating, they can get a loan for a low rate of interest. Use this loan to put towards your debts, then make payments on the low interest loan.

If you have equity in a home you may want to get a home equity debt consolidation loan. You will get an excellent interest rate with which to pay your high interest rate debts.

Negotiate for getting out of debt

If you can't make your payments and your only alternative may be declaring personal bankruptcy, call your creditors and ask them to lower your interest rate, or receive debt elimination help by giving you better payment terms.

This strategy may not work (if they decide to raise your rates because they think you are now a higher risk), but if your only alternative is bankruptcy, there is no harm in asking.

By following these steps you may be able to reduce your debt on your own, and avoid bankruptcy. It takes discipline and planning, but you can do it!

Debt consolidation for getting out of debt

This is a method of borrowing money to repay your debts, which at first glance seems rather strange.

Debt consolidation doesn't reduce the amount of your debt, you are simply replacing numerous debts with one large debt.

Here's an example: your total debt is $20,000 owing to five different credit cards. The average interest rate on your credit cards is 19% per year, so you are paying almost $317 in interest every month on your credit cards, and that does not include any repayments of principal.

If you have a good job and good income, you can go to your bank and negotiate a loan where you pay the debt off over five years. Because it's a loan and not a credit card, the bank charges you an interest rate of 8%, let's say.

Now your monthly interest payments are less than $134 per month, and the interest goes down each month because you are actually repaying your debts!

This shows you the power of a debt consolidation loan. You borrow at a lower rate, to repay higher interest rate debts.

If you own a home, the numbers are even better, because with a home as security your interest rate may only be, say, 6%. You save even more money.

A debt consolidation loan makes sense if you have high interest rate debts, such as credit cards and finance company loans, and you have the ability to borrow at a lower rate. To qualify for a debt consolidation loan the lender will want proof that you have a good job with good income to prove you can repay the loan.

Debt Elimination Help: Secured Loan

Outside security, such as a car or a house, will make it easier to qualify for a debt consolidation loan, and you will qualify for a lower interest rate.

Don't be tricked into getting a high interest rate debt consolidation loan at a finance company just because the monthly payment seems lower. This is not the way to go for getting out of debt.

Some finance companies will take your 19% interest credit cards and lend you money at 30% to pay them off, but because they stretch your loan payments out over 10 years, you are paying slightly less each month.

Don't take this route. Over the ten year term of the loan you will pay a huge amount, so it's not worth it.

Debt consolidation loans are one of the best bankruptcy alternatives for people with a good job who can afford to repay their debts over a reasonable period of time.

There are other options, such as consumer debt consolidation services through organizations such as MyCDC.org. MyCDC utilizes services that will consolidate debts without the need of a loan.

These programs will consolidate debts by negotiating with creditors to get you a lower repayment amount without the risk of any type of debt consolidation loan.