Debt Elimination - 6 Ways to stress-free living

If you're in stress dealing with excess debt, it's time you choose a debt elimination program to help you avoid further crisis. It'll help reorganize your financial life and give you the chance to save a considerable part of your hard earned money.

To eliminate debt, first of all, calculate how much you owe in total. Then go for no-obligation free debt counseling with a debt relief company. Counseling helps in assessing your financial situation so that you'll come to know the right way out of debt.

5 Debt elimination mistakes you should avoid

While you're trying your best to eliminate debt, make sure you avoid making mistakes such as:

1. Not following a budget

If you don't stick to a tight budget, you can't keep a track of where your funds are going and you don't know where you're overspending. So, make sure you plan a budget while you're on a debt elimination program.

2. Canceling credit cards

You shouldn't cancel credit cards if you haven't paid them off. Instead, you can negotiate lower rates with the credit card company and pay off the accounts before you close them.

3. Paying only the minimum

If you keep paying the minimum each month on your credit cards, it'll take a long time before you can actually pay them off. This is because the minimum payment includes mostly the interest. So, if you don't pay more than the minimum, you won't be able to reduce your outstanding balance.

4. Falling into scams

Debt elimination scams are something you should be careful about. Such scams are carried out in 2 ways:

Debt elimination letter scam:

This is where a debt elimination agency sends you a letter which you can show your creditors and have your bills eliminated. In return, you'll have to pay a large fee to the agency. Bond for discharge of debt or Redemption certificate is the name given to such a letter which claims the debt as void just because many fees charged by creditors are illegal.

Stealing your personal details:

This is where you come across an internet ad promising to resolve your debt problems. They'll ask you to provide your personal details along with certain fees. In return they'll offer you a document that is expected to release you from your debt burden. But your debt actually exists and the scammers have stolen your identity using which they can commit other types of frauds.

5. Using credit cards instead of cash

Most often you spend more when you use credit cards instead of plain cash. You need to change your perspective on the use of credit. Try to avoid making big purchases, that too with credit cards as otherwise it will add to your debt.

With debt elimination programs, you can get rid of your bills and avoid harassment by creditors and collection agencies. All you need to do is, create a realistic budget, choose the right program and make payments on time. You can thus get out of debt and have better control over your money.

What are the credit card debt reduction tips?

There are 5 credit card reduction tips to watch out for.

Pay more than the minimum
The minimum payment includes mostly the interest you pay on your credit cards. As such it'll take a long time for you to clear the debt. Paying more than the minimum reduces your outstanding balance thereby helping in credit card debt reduction.
Split minimum payment if you can't pay more
If you can't pay more than the minimum payment, split it into half and make 2 payments a month. Since interest is calculated on the average daily account balance for the entire month, therefore, making a payment every 2 weeks reduces the average balance. It also lowers the finance charges included in a single minimum monthly payment.
Make extra payment on your bills
Whenever possible, try making extra payments towards your credit card. It will reduce your bills and help in credit card debt reduction.
Credit card balance transfer may help
You can transfer the outstanding balance from a higher interest to low interest rate credit card (or a 0% introductory card). Just watch out for balance transfer fees while you do so.

13 Forgotten ways to eliminate your household debt

  1. Re-shop for auto, life and home insurance to see if you can bring down the premiums and other costs to any extent. This would certainly help you save some and pay towards reducing your debts.
  2. Drop all unnecessary expenses such as newspapers, magazine subscriptions, eating out, shopping, etc. Anything that is not a necessity should be strictly avoided unless and until you are completely out of debt.
  3. Try to buy groceries and other necessities in bulk to have good discounts. You can have tremendous savings if you buy stuffs like meat, bread, vegetables, eggs, bread in bulk or for a month's need.
  4. Downgrade or get rid of completely of your cable package if there are so many channels that you seldom watch or you don't watch TV altogether.
  5. Packaged cereals are always expensive. You can switch to oatmeal, fruits, eggs etc. Besides bringing some good savings it'd also provide you with more nutritional value.
  6. Stop hosting all in-house parties if you feel your budget is not permitting or pressurizing you to make huge purchases.
  7. If you eat out, do away with costly meals. Always try to share large entree or have small appetizers than costly meals. Also, try to skip soft drinks and quench your thirst with water. If possible skip the extras too.
  8. See if you can trade services with your friends. Perhaps, stuffs like haircutting, babysitting, handyman, photography, car wash, pet-sitting etc.
  9. Switch off the lights, fans, ACs and thermostats whenever you are not at home. You can just leave the headache and program your thermostat for some savings.
  10. Do aerobics and free-hand exercises instead of paying hefty monthly fees in gyms. Just walking at an average speed for 1 hour a day can help you reduce 300-350 calories.
  11. Arrange homemade foods for any party you host at your place. Avoid buying prepared foods from outside.
  12. Get a part-time or seasonal job to boost your income and use that additional money towards eliminating your debts.
  13. Disconnect your phone service at home if you have more than one or the bills are burdensome on your pocket.

Tips to negotiate and reduce your debt

Check out the 13 tips which can help you negotiate your dues successfully.

1. Negotiate for accounts having the lowest balance first
It is better to communicate with your creditors and settle those accounts which have the lowest balance first. Once you pay off the dues on those accounts, negotiate a settlement of the account having the next highest balance.
2. Create a budget so as to explain your financial situation
You need to prepare a monthly budget so as to inform creditors about your financial situation. It'll help creditors estimate how much you can pay on a monthly basis.
3. Check your affordability before you make an offer
Make an offer of settlement depending upon how much you can afford. Avoid asking creditors how much they are willing to accept for a settlement of your account. Do not agree to automatic electronic payments from your checking account or payments through post dated check.

4. Show the creditor you're determined to pay off dues
It is essential to make your creditors understand that you have the determination to repay your debts and bring your finances back in order.
5. Explain your debt payoff goals
When you're negotiating with creditors, explain what goals (for instance, you wish to pay in full and improve your score) you have in order to clear debts. Unless creditors understand your goals, they may not agree to listen to your problem.
6. Explain how your creditors will gain if you settle the dues
When you're negotiating with creditors, make sure you explain how the creditors will benefit from a settlement. Make them understand that they won't have to approach CAs to collect your dues and they need not go to courts to sue you.

7. Speak politely with your creditors
If you're polite and understanding while dealing with creditors, it may be easier for you to get an agreement on debt settlement.
8. Try again if the creditor refuses to settle the first time
If you negotiate to settle your dues and the creditor refuses to do so, you may wait for a month or so and try to negotiate again.
9. Do not give personal details
Avoid giving your personal details (such as your checking account number) to the creditors or CA.

10. Know your rights as a consumer
When you're dealing with a creditor or collection agency, make sure you know your rights as a consumer. Check out the provisions under the FDCPA. It'll make you aware of what debt collectors shouldn't do when they're collecting your payments. If in case the collectors violate the laws, you can take suitable action against them.
11. Be precise when you explain your problem
It is better to not give a lengthy explanation of why you can't pay. Creditors or CA will be more interested to know what alternative proposal you've thought of in order to get rid of dues.
12. Record your conversation with creditors or CA
There are 35 states which allow you to tape your conversation with creditors or CA. There are 15 other states where you can record the conversation after taking permission from the creditor/CA. Keeping a record of such communication prevents creditors from denying what they've agreed to.

13. Negotiate a "Pay for delete" or "Paid in full" status
When creditors agree to accept less than the amount you owe, they'll report your account status to the credit bureaus. In most cases, your credit report will reflect a "Settled" or "Paid as agreed" status, which has a negative impact on your credit score.
To avoid getting a credit hit, negotiate a "Pay for delete" agreement with your creditors so that your entire account detail is removed from the credit report. Alternatively, you may request creditors to update your account status as "Paid in full". Once the creditors agree to what you've requested, let them provide you with a written agreement of the same.

5 Steps to eliminating debt while studying in college

Debt is a term that causes an immediate feeling of discomfort to all of us. Graduate school debts manage to make us feel even worse because of the sense of uncertainty it essentially entails. Here are ten ways how to become debt-free while in college.
  • Aim to become debt-free - This is the most important and the first step towards reaching your target. What you need to do is plan flawlessly as to what the course of action must be; what you need to immediately do or stop doing which in turn will reduce the drainage of funds, which could be channelled into paying the debt off. With a clear road map, a fair idea about the challenges ahead, being fully aware of your strengths and weaknesses and putting them to proper use you can stay motivated towards achieving your target. Always remind yourself that what you are doing is in order to have your freedom.
  • Look for a part-time job - You must look for another income-yielding part-time job to occupy your usable unemployed hours of the day instead of wasting them in idle languor. The extra money you earn will definitely speed up the process of debt-clearing by leaps and bounds. Instead of just thinking of saving, you must have your mind open for the other appropriate option which is increasing your income, an option which most people miss out on. So start with something as simple as selling things on Ebay or Amzon. Remember that you can do amazing things with your skills which will not only earn you money, but also build you a reputation.
  • Apply for Scholarships and Fellowships - Apply for scholarships and fellowships without pondering much over it. Hesitation will only delay the process and time and money will be lost. Such grants can not only cover your tuition fees but also do wonders to your bank balance and your standard of living without having to do much on your part except for applying for them and providing the funding agencies with timely update.
  • Choose your subjects with a professional outlook - Be clear about your employability after having graduated with the subjects you have chosen for your major. Marketability of the subjects must be kept in mind in order to land a job that would pay for the efforts you have put in. Just because you love literature does not mean literature would fetch you a reasonable pay package. Be practical while choosing you’re major.
  • Be financially responsible - There is a need to be financially responsible when you are taking even the smallest of decisions, for example going out for dinner. You need to make smart choices in where you live, what you spend on and things you invest in. Being responsible in dealing with your finances can give you a big edge when it comes to clearing your debts.

Last Updated on: Fri, 18 Dec 2020