How to get out of debt: Available options and helpful FAQ

If you're in financial crisis and your outstanding dues are getting out of control, it's time to take some action and sort out the situation. Even though your finances are in mess, you can still get out of debt and regain control over your money and save at the same time.

What are your options to get out of debt?

You have the liberty to choose from various strategies to pay credit card and other bills.

Get out of debt plans and programs

Professional debt relief programs:

  • Debt management plan (DMP)
  • Debt consolidation program
  • Debt settlement program

Do It Yourself ways:

  • Debt snowball strategy
  • Debt avalanche strategy
  • Balance transfer method (For credit cards)
  • DIY settlement
  • Negotiation with creditors for alternative payment plans

Therefore, you need to have a brief knowledge about the ways to choose your best get out of debt plan.

5 Types of debts you can pay off using the above strategies

With the help of the above-mentioned strategies, you can repay your unsecured loans such as:
  1. Credit card debt
  2. Medical bills
  3. Personal loans
  4. Payday loans
  5. Private student loan

3 Professional get out of debt plans and programs

If you think your bills are out of control, you can opt for a no-obligation free counseling session from a debt relief company, where the counselor can give you the best advice to get out of debt.

1 Debt management plan: If professional help is what you need, you can choose debt management plan (DMP). Through this, you can repay the entire outstanding amount just by making one payment every month.
2 Consolidation program: A bill consolidation program is somewhat similar to a DMP, where you can repay your outstanding dues in full with the help of single monthly payments.
3 Settlement program: If you can’t repay the outstanding balances in full, you can enroll in a settlement program wherein you can get out of debt fast by paying less than what you owe.

The counselors can guide you about which program will suit you the best. You can also gather knowledge yourself and find out the right get out of debt plan to achieve success.

DIY and other best ways to get out of debt

If DIY options are what you want to opt for, you can choose debt snowball, debt avalanche strategies, or with a combination of other strategies.

  • Using debt snowball method: You continue making minimum payments on all your debts and pay a little extra to the smallest debt amount.
  • Opting for debt avalanche strategy: Just like the previous one, make minimum payments on all, but here, you pay a bit more to the highest interest rate account.
  • Taking out a consolidation loan: A consolidation loan can also help you out to repay your outstanding debts and replace them with a new loan, which you can pay back in monthly installments.
  • Transfer balances to a low rate card: Another way to repay credit card debt is to opt for balance transfer method where you transfer all your existing credit card debts to a new card.

Answer these 4 questions to choose the best strategies to get out of debt

1 Is your time limit one year to get out of debt?

Ans: If this is your time frame and you’re worried whether or not you’d be able to become debt free within that time, then you should know that it depends on the outstanding amount. You can pay off remaining balance within one year if it’s manageable; that is, you can repay the amount comfortably with your income after meeting your daily necessities. You can choose from DIY options like debt snowball or avalanche or enroll in a DMP or a settlement program to repay dues with professional help.

2 How can you pay off a lot of debt?

Ans: If you have to repay quite a lump sum amount and you think you can’t pay them in full, debt settlement option can come to your help. As already discussed, through this option, you can get out of debt without paying the entire outstanding amount.

3 Do you want to get out of credit card debt fast and want to know how to do it?

Ans: Credit card dues is one of the most common debt problems people struggle to deal with. One of the best ways to pay your credit cards is to opt for balance transfer method. You can get out of credit card debt quickly if you can take out a zero or a relatively low-interest credit card with a credit limit of about the sum total of the outstanding balances on your multiple credit cards. Since the interest rate is zero or very low, you can repay your credit card debt fast.

4 Do you want to solve debt problems all by yourself or with professional help?

Ans: First answer this question - Are you confident to pay off your dues all by yourself? If so, you can try out the DIY options. And, if not, then you need professional help to get out debt.

How budgeting can help you solve your problems

Doing proper budgeting is one of the smart and best ways to get out of debt. Planning a proper budget is what you need to save money and repay outstanding dues.

When you go for a counseling session, an expert can guide you and offer tips on how to get out of debt and save money at the same time. Even with a low income, you can manage by planning a suitable and effective budget.

5 FAQ to help you repay what you owe and solve your queries

Q 1 -From where can you get financial advice to be debt free?

Answer :Financial experts can help you out by providing useful advice to solve your debt problems. When you opt for a counseling session, the experts can analyze your financial situation and offer the best advice to get out of financial debt.

Q 2 -Can you repay debt without taking out a loan?

Answer :Yes, you can. You can enroll in one of the get out of debt programs or opt for DIY options where you can pay off outstanding dues without taking out a loan.

Q 3 -Are you concerned about getting out of bad payday loan debt?

Answer :Payday loan debt is one of the bad debts since the outstanding amount tends to increase due to very high interest rates. So, try to repay payday loan debt as fast as possible.

Q 4 -How can you get out of debt with no money?

Answer :If you don’t have enough amount to repay debt or you’re experiencing a financial crisis, then you can file for bankruptcy to become debt free.

Q 5 -Is it possible to repay debt with bad credit?

Answer :Yes, it is possible. One of the simple ways to get out of debt with bad credit is to negotiate for settling debts. It will be easy to get yourself out of debt if the creditors are convinced that you can’t repay the balances in full.

4 Steps you can follow to choose the best strategy

step
1

Calculate your overall
debt amount

Take into account all your outstanding dues and compute how much you need to pay off.

step
2

Categorize
your debts

Now, categorize your debts as per outstanding dues, interest rates, along with other specifications.

step
3

Gather knowledge about
possible debt relief options

Make yourself knowledgeable about your possible debt relief options.

step
4

Choose the fastest or simple
ways to get out debt

Then, choose the best way to get rid of your debts. You can choose one or multiple ways to solve your debt problems.

Financial advice to get out of debt

Avoid new debts
When you are already in debt, do not take out any more loans or credit. Avoid using credit cards at this point of time. However, cancel only those credit cards which have zero balance and negotiate with the credit card company to lower your interest rate.
Curb your spending
You can cut down your expenses by controlling your spending habits. Add up your monthly expenses and find out what you've spent the most on. Simply avoid unnecessary expenses if you're interested in getting out of debt.
Increase your income
Your income will go up if you get a part time job. Sometimes selling your stuff online can give you some extra money. More money helps you put more towards paying off your debt.
Learn how to live a frugal life
Develop an awareness of how to manage your finances better and lead a frugal life. For instance, if you're out for shopping, make sure you make use of the 55 frugal shopping tips and avoid overspending.

Last Updated on: Sun, 8 Apr 2018