Most people struggle with debt repayments in one form or another. Debt can come in the form of credit card bills, mortgage payments, student loans, and car loans. If you are really strapped for cash, it could even come in the form of payday loans. Debt woes affect different people in different ways. Some people spend day and night agonizing over their debts while others are resigned to the fact that debt will be a problem for the rest of their life. It doesn’t have to be this way. Let’s take a look at a few ways that debt can be eliminated. The following is a guest post.
Increase your income
You will feel a lot better about your debt problems once you develop a plan of action. A good debt plan should involve simultaneously increasing your income while decreasing your debts at the same time. You can increase your income by earning some side income from freelancing, consulting, blogging, or ecommerce. Any part time income earned can be used to attack your current bills.
Reduce your debts
Debt reduction can be achieved by either increasing the amount that you pay on each debt or getting the debts reduced. If your interest rates are sky high or you have trouble repaying your debts, you could consider debt counseling and debt consolidation. High interest rate loans like credit card debt make them virtually impossible to pay off if you have a large balance.
For example, if you have $25,000 in credit card debt and your interest rate is 29%, more than $7,250 is being paid in interest alone each month. That is $604.16 a year just in interest payments!
Consolidate your loans
Consolidating loans makes sense in situations like these. Debt consolidation is taking out a big loan in order to pay off a bunch of different loans. The advantage of this is that you are left with one single loan and one monthly loan repayment. The end result of debt consolidation is a lower monthly payment and a lower interest rate to repay. These plans can often keep you from having your possessions repossessed and your home foreclosed on.
Bankruptcy
All of the solutions above are designed to keep you from bankruptcy which is known as the option of last resort. Bankruptcy is a legal way to discharge your personal and business debts. Most of your assets will be liquidated to satisfy existing debts. You won’t have access to credit for a year or two. After that, you can start rebuilding your financial life again.
Remember that your first option is to always pay your debts as agreed. If for some reason you are unable to do this, you should look at these alternatives.
Take a look at the plan that I used to get out of debt.
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