Effective Ways To Get Out Of Debt Without Breaking The Bank

Debt remains the #1 bugbear for anyone trying to get ahead. It’s a grim reality for approximately 80% of Americans, but there are effective ways to minimize your overall debt burden.

The first step towards financial independence is debt elimination. Once you know how much you are in the hole, you can adopt a calculated plan to eliminate that debt step-by-step.

One of the worst things that people do with debt is turn a blind eye to the problems facing them. It’s imperative to stare debt in the eye and formulate an effective plan to chip away at it.

One of the worst forms of debt is high-interest debt. This comes in the form of credit card debt, high interest loans, variable interest rates on mortgages during monetary tightening, and the like.

A wonderful way to discover how much debt you currently have outstanding is to simply write it down. Take a snapshot of your financial position, starting with each of your credit cards. If you are the primary account holder, list your name alongside the amount of the debt, the interest rate that you’re being charged and the minimum monthly payment that you are prepared to make.

Own that debt; that’s the first step towards eliminating it.

This survey gives you a mental snapshot of your outstanding debt. Fortunately, whatever figures you are looking at are not the worst that they could be.

This brings us to the first rule of debt management: Don’t panic. A cool and calm head goes a lot further towards problem resolution than panicking about your current predicament.

Where Do You Begin With Debt Elimination?

This is one of the most common questions that personal finance experts deal with. When a person is in the red to the tune of thousands of dollars, it’s often overwhelming. Fortunately, there are hard and fast rules that dictate how best to tackle the issue of debt. Foremost among them is the following: attack the highest-interest debt burden first. For some people, this could be a credit card, student loan, auto loan, or a home mortgage.

In case you’re wondering which one is likely to have the highest interest rate, simply check. By and large, credit cards are associated with elevated levels of interest payments, and depending on the nature of your home mortgage, that could also be a significant cost factor.

Consider two credit cards: one with an interest rate of 15.5% and a balance of $1500, and another credit card with an interest rate of 5.75% and a balance of $2,000. Clearly the credit card with the higher interest rate is going to eat into your personal disposable income a lot more than the credit card with the low interest rate. Much the same is true when it comes to repaying student loans. Most Americans have significant debt burdens when it comes to student loans. It’s never a good idea to just make the minimum payment on debt. It’s always advisable to pay a little bit more so that you can bring down the overall levels of debt and the associated interest burden.

Bundling Debt at a Lower Rate

Debt elimination experts have strong views when it comes to getting out of debt and running up debt at the same time. The concept of ‘Debt Bundling’ has gained traction in recent years. There are ways to reduce debt and ultimately to eliminate debt, but they begin with a debt consolidation plan. Simply put, these options are provided at a lower interest rate than the prevailing credit card rates or loans, and they ‘consolidate’ all of the debts at a lower rate.

While you’re at it, many experts propose cutting up your credit cards, or simply locking them away in your safe and avoiding the temptation to swipe your plastic every time the urge appears. It’s never a good idea to add more debt to a mountain of debt as the likely outcome is an avalanche.

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