When controlled properly, debt is a valuable tool. Loans allow us to buy houses, cars, and educations. Lines of credit make spending more convenient. And payment plans save us from having to dealing with major expenses, such as out-of-pocket medical costs.
A Guide to Managing & Getting Out of Debt
While debt is often necessary and useful, it can easily become a burden and we can quickly find ourselves in a hole that seems impossible to escape.
In many respects, loan structures and minimum credit card balances are designed to keep us in that hole. As long as we’re paying interest, banks and credit card companies make billions of dollars.
However, as soon as the hole gets deeper, our lives begin to fall apart and once you’re in too deep, it doesn’t seem like there is any way out.
Because debt can feel like a bottomless pit, many fail to take action, remaining in the dark about their options. Sometimes this is true for years.
People attempt to survive under increasingly impossible stress, and unfortunately, the breaking point comes at the expense of relationships and personal well-being. There’s always hope. The sooner you take action, the sooner you can end the vicious cycle.
Steps You Can Take to Get Out of Debt
When debts first become unmanageable, often we take the wrong kind of action. Rather than facing the reality of our situation, we go to extremes to cover it up. Sometimes we create our own misguided debt management plans that involve working two jobs, skipping necessary payments, or allowing balances to grow.
Or we do things such as taking out payday loans or additional credit cards, pawning things, and making sacrifices that amount to poor health or interpersonal decisions. Our own debt management plans might involve hiding cash, telling lies, and even fighting with loved ones.
Without knowing the proper steps to take, we make the situation worse, and at the same time, everyone in our lives begins to suffer. We fail to recognize that the only real solution at this point is to get professional help.
Taking matters into our own hands, we ignore debt relief options for years before it finally dawns on us that none of this is working. Knowing that your own debt management plan is probably not going to work and that real help is available, is your first step. After you’ve accepted that, many more options open up.
Step 1: Gather All Your Financial Information
Although you might want to speak anonymously with a debt consultant first, assessing your situation accurately and completely requires knowing exactly where you stand with your debts and finances.
Early in the process, you should begin to gather all your records of bills, loans, creditor information, collections, payments, income history, and bank accounts. The more information, the better, and ultimately you will need all of it to create a viable working plan.
Step 2: Meet With a Debt Consultant or Credit Counselor
Once you know that you can accurately describe your situation, speak with a non-profit debt consultant or credit counselor. Non-profit agencies can provide free information and do a free, confidential assessment of your financial situation.
They’ll let you know what they think the smartest course of action is and get you started on it. Sometimes just knowing you have to take action, and knowing that simple steps are available, is the first form of debt relief you’ll experience.
Step 3: Validate Debts and Speak with Creditors
Before you do anything else, you might be advised to speak with your creditors about hardship plans or other arrangements that will allow you to pay back debts on your own. It really depends on your situation.
Another early step is to validate your debts, which can slow down the collection process, provide needed documentation, and verify any debts that seem questionable to you.
Step 4: Decide Between Debt Management and Debt Elimination
When you speak with a non-profit debt consultant or credit counselor, you’ll get free advice on how to proceed next, which might involve one of two approaches: either a debt management plan or a debt elimination plan.
While both of these types of plans can have a similar goal, there may be differences depending on your situation. For example, you might be able to sustain and manage certain debts while eliminating others, or you might need to focus on becoming completely debt free.
Step 5: Compare Debt Relief Programs
Among the different types of debt relief programs are various options that work best in particular circumstances. Sometimes different programs can be combined with a comprehensive debt management or a debt elimination program. Other times they are best used individually.
These options include personal budgeting, debt consolidation, debt negotiation or settlement, and as a last resort, bankruptcy. Everything depends on your own circumstances, but counselors and consultants will work with you to come up with the right plan.
Step 6: Take Action and Get On With Your Life
Once you have a plan, it’s time to commit to it. Out of everything you’ve done so far since you’ve been in debt, this step takes the most discipline and commitment. Debt relief programs only work when you follow them, and usually, they take a couple years, so you have to be ready to stay dedicated to the path you’ve chosen.
The result will be a brighter, easier future, so taking action has its rewards. Once you begin to see the results of your hard work, and once your debts begin to finally disappear, you’ll be ready to get on with your life.
No matter what type of debt you’re in, there is always a way to get relief and get your life back on track. One of the first steps is to recognize the problem and accept help. Whether you’re dealing with consumer debt, medical debt, multiple bills you can’t pay, or collection notices, there are solutions.
Eliminating Stress and Taking Action on Your Own
Non-profit debt consultants will work with you to analyze your situation. They’ll advise you on debt relief steps that you can take and they’ll help you cope with stress and take simple actions that may provide immediate relief.
They’ll explain the inner workings of debt collection, junk debts, debt validation, and your legal rights. They’ll also give perspective on the debt relief industry, allowing you to take an objective look at the various options that might work best for your situation.
Consumer Credit Counseling
When you have too many payments you can’t meet, you might qualify for a debt management or debt elimination program. Consumer credit counselors can provide free educational materials about various strategies and programs for which you might qualify.
This could be a combination of budgeting and debt consolidation, or it could entail a debt settlement program. It all depends on the nature of your debt and your unique financial situation.
Debt Consolidation, Debt Negotiation, and Debt Settlement
When you meet with a credit counselor or debt consultant, you’ll learn about a variety of debt relief options. Among them are debt consolidation, debt negotiation, and debt settlement. Each has its pros and cons, and you’ll learn about the benefits and hazards of each potential solution.
You’ll be given warnings about various scams to avoid, but also told about amazing success stories. You’ll learn how various programs work, and how they might work for you.
Below is a list of topics you can explore on this website, and which you might discuss with a credit counselor:
- Debt consolidation companies
- Debt relief companies
- Debt validation
- Legal recourse after debt settlement
- Medical debt
- Settling debts with the original creditor
How do you save money and get out of debt?
You may be wondering how to prioritize your debt payoff strategy and saving to prevent future financial disasters. This is an extremely personal question, so here are a few ideas to consider and determine which is the best solution for you.
Many financial experts recommend building up an emergency fund before you start paying off debt. You can start with just $500 in a savings account that’s not connected to your everyday checking. Then when you have a true emergency, you won’t have to charge anything to get by. Instead, you can draw on that emergency savings.
Others argue, however, that if you have substantial high-interest debt, you should throw every extra penny at it. Since it’s costing you more money each month you have to pay interest on those debts, you’ll save in the long run because you’ll shorten your repayment period. At the end of the day, you have to make a decision that makes you feel the most comfortable.
Take Action to Turn Your Life Around
Dealing with unmanageable debt can make it impossible to live a happy, healthy, and productive life. When you’re in debt, bad financial patterns tend to snowball and everything gets put on hold.
However, debt relief provides many solutions. All you need to do is take action and accept help. Speak with a free credit counselor or debt consultant today and make the move to get your life back on track.