Ways to Get Out of Debt

A life filled with debt is a life filled with stress and this sign of danger, has a serious toll on the health. Debt is the means of using purchasing power, before earning the payment. This is about spending the future earning today and paying them in the future. While spending the money, most people don't even think of the ways to get out of debt. In this Buzzle article, I provide you with some tips on how to effectively manage debt and repay every penny.

The Cycle of Debt

The word debt originates from the old French word "dette"and Latin "debere" which means to owe, from "de habere" meaning to have, reintroduced in the 17th century. A debt is granted with an expected repayment plus interest with or without security. A debt cycle begins, when a creditor agrees to lend a sum to a debtor, in return of an interest, on the debt.

The cycle of bank debt, begins with an agreement between the debtor and the creditor (bank or individual creditor), regarding standard of the debt repayment. The payment is designated as the total sum of money, that includes the principal, with the agreed interest, either in cash or goods. The repayment is made in installments, with the increments included, over a period of time. It can also be paid in lump-sum amount. Credit card companies and debt corporations have successfully used debt, as a lending power for their business.

10 Ways to Get Out of Debt

These are some of the ways in which, you could get out of debt, by using and planning the finances carefully. There is no direct way of getting out of debts, without paying or bankruptcy filing.

1. Use the assets to clear the debts: If the assets owned has significant equity, then they can be used to clear a part or whole of the bad debts. The debt can be controlled, by using a part of the asset to clear a part of the debt and bringing it to a manageable level. Considerable amount of money can be saved, if the high interest credit card debt is converted to a lower cost one.
2. Second job: The money from a second job can be used to clear some of the business debt. A list of the debt with the interest rate, can be made and those with higher rates can be paid off first.
3. Zero credit cards: The best way to cut debt is to immediately destroy all the cards and retain one card for emergency use.
4. Repayment plan: The expenses should be cut and the saved money must be used to pay those debts with high interest first.
5. Credit consolidation loan: A credit consolidation loan can be used to pay off all the debts and have a new smaller loan with a lower interest.
6. Debt counselor: A debt counselor can assist in the control of the spiraling debt. The counselor can improve the credit rating as credit bureaus will be aware of a credit plan at work. The payments will be organized and the lower payment level will be decreased to default in payment. Counselors can also help in formulating a plan which will ensure that the credit will be cleared within a stipulated period.
7. Credit card debt consolidation: A consolidated payment plan can be set up with the creditors, to enable a good credit rating. It is similar to a credit consolidation loan except money is not borrowed to pay off the creditors.
8. Lump sum payment to the creditors: If a relative or someone is ready to help in clearing the debt, the creditor can be approached to pay off a percentage of the loan and the remainder may be written off. Some creditors will be willing to accept this offer, rather than have a bankruptcy.
9. Bankruptcy under chapter 13: If the credit accumulated comes under the provisions in chapter 13 bankruptcy, then the provision can get a relief from a part of the credit.
10. Bankruptcy under chapter 7: The time for a new start has come as there is no option other than a full bankruptcy.

The ways to get out of debts are never easy but the volume can be reduced or lighten with a little planning. Still, fight on and hope to get a good credit standing and start a new line of credit. All the best!