Debt and credit

Workable Ways to Get Out of Debt

DebtAccording to American Debt Advisor, around 80% of the population is in debt. If we exclude secured debt, car and home loans, there is still around 50% of the population carrying debt, some of it in the amount of tens of thousands of dollars. And these statistics are mirrored around the world in the so-called developed countries. For most people, it is time to get out of debt! Carrying a large load of unsecured debt can feel crushing, but there are a number of ways to get out from under this heavy burden. It is helpful to review the various ways to get out of debt in order to make the right decision for your individual circumstances.

Do It Yourself Debt Reduction

Also known as "the debt snowball" this method is where you list all of your debt, both secured and unsecured. You select one particular debt — the selection could be based on the highest interest rate, the lowest outstanding balance, or the lowest monthly minimum payment. Each of these selections has their benefits so pick the one that will work best for you.

The plan is to pay minimum on all other debt while paying extra on the one debt you have singled out. Work out and stick to a budget for your living expenses and pay an extra amount that you fix, added to the minimum due, and continue to pay that amount each month until that bill is paid off. Then you take that amount of money you've been paying against that bill and add it to the minimum of the next bill on your list.

For instance, say you have a spare $100 after you have paid for all living expenses and met minimum requirements of all other debt. And let's say the minimum due for the selected bill is $50. You pay $150 towards that bill each month until it is paid off. Then you move on to debt #2. If debt #2 has a minimum of $100, you pay $250 each month until that debt is paid. Then, the $250 snowball is applied to debt #3, added to its minimum and so on until eventually, all debt is paid. Imagine how good that is going to feel!

Debt Consolidation

For people with good credit, this is a good option. Consolidation is simply combining existing debt into one single debt which is beneficial if, and only if, it saves you a significant amount on interest and lowers your monthly payment. To make this work for you, however, you will need to exercise self-discipline so as to not run up debt on the credit cards you consolidated. If fact, you may consider closing those cards to avoid the temptation. At the very least, cut the cards up so using them would be more of a hassle, especially if the purchase you're contemplating is an indulgence.

Credit Counseling

Do your research and find a reputable credit counseling service, as there are sharks out there. The credit counselor will work up a livable budget with you and help you determine if you need a debt management plan (DMP). The counseling bureau will work with your creditors to lower the interest rate so the total amount you pay each month will be less, giving you some breathing room in your budget.

Debt Settlement

Debt settlement is when you negotiate a principal reduction with your creditors so you will owe them less money. However, they will want the payment in full at the settlement so this option only works if you have the cash to make the full payment of the negotiated reduction. Beware, though, that "forgiven" debt is often taxable and will be treated as income by your taxing authorities.


When your debt is so large that you see no way out, bankruptcy is the final option. A large amount of your debt may be discharged while still being able to keep your home and your car. It will definitely put a huge dent in your credit score, but sometimes it can be the best option for you. Seek the counsel of a reputable bankruptcy attorney.

No matter what option works best for you to get out of debt, keep in mind that it took time to get buried by debt, so it will take time to dig yourself out. Whether you do it yourself or seek professional help is an entirely personal decision that only you can make for yourself. Even if you choose to do it yourself, there is plenty of help out there, whether on websites or in books.

If you have any questions, please ask below!