Digging Your Way Out of Debt

Posted on Feb 21 2014 - 4:05am by Paxton Yoshida

coin bank and moneyGetting a loan has never been easier, especially now that more and more lending companies in Sandy are streamlining the process of loan application and looking beyond borrowers’ credit reports. You can get approved for a car mortgage in a day and obtain a payday loan in Sandy in less than an hour.

While loans are helpful, they are also the main reason millions of Americans are sinking in debt. Your debt has a bigger impact on your financial future than you can imagine. Whether it’s a mortgage or payday loan, it can limit your lifestyle and affect your credit report if you don’t deal with them now. The first step to getting out of debt is to know where you stand. Face the numbers; obtain a copy of your financial reports and develop a solid plan.

Here are a few options on how you can dig your way out of debt:

Do-It-Yourself Debt Reduction

In this strategy, you make minimum payments on the debt you’re targeting to pay off first. There are two ways you can do this; you can follow the avalanche approach or the snowball method. You pay off the account with the highest interest first with the avalanche approach. With the snowball method, you prioritize the debt with the smallest balance. You apply the payment you were making to your next target after paying off the first, and so on until they are all gone.

Credit Counseling

Hire a credit counseling organization to review your budget and determine if a debt management plan (DMP)is right for you. Your lenders and credit card issuers will typically reduce your interest rates if you enroll in a DMP. You then make monthly payments to the counseling agency, which will pay each of your creditors. A DMP may work if your creditors lower your interest rates enough to provide a breathing room in your budget.

Debt Settlement

You might want to consider negotiating a debt settlement if you’re dealing with significant debts you think you can’t pay within five years. With this method, your creditors agree to accept less than the full amount to satisfy your debts.

The sooner you start paying off your financial obligations, the earlier you can get out of them. Manage your debts now and live a more peaceful and relaxing life.