Enlarge Image The first thing you have to do before you can get out of debt is to know how you got there in the first place. After this, you need to make some corrections in your spending habits. You gain little if you get out of debt only to be back there a few months later.
Next, you need to assess your financial situation. This includes getting an accurate assessment of your currents assets and liabilities and calculating your debt-to-income ratio. You should ideally include mortgage payments in this ratio, since it gives a better overall picture.
To get out of debt and stay out, you need to have a better understanding of how credit works. Unintelligent credit card spending is the root cause of most debt in the world today. If your debt is heavy, you should seek the services of an agency specializing in credit counseling. Such an agency can provide you with general budgeting guidelines and give you money management advice to ensure that you do not have debt problems in the future.
There are various means of getting out of debt including taking a consolidating loan, renegotiating your existing debt, availing of debt consolidation or going in for debt settlements but there is no magical way. All these methods are good ways to begin, but none is a sure-fire fixit solution. If you want to get out of debt - and stay out you must change your lifestyle and spending habits. There are no magic wands to wave to make debt go away. You will finally have to pay all of it.
The first lifestyle change is to make your debt as low as possible. In this way, you can pay off your debt at a faster rate. Remember that most companies fear that you will never pay off your debt, and this means that many are willing to extend you better terms by ways of debt negotiation. They may even take a reduced amount by ways of debt settlement to ensure that they get some of their money back.
If you opt for debt negotiation or debt settlement, your debt negotiator will evolve a new debt amount. Often, it is possible for you to pay only 60-70% of the original loan. In case you do not have the option of a lower payment, your creditors may permit you a lower interest rate. Either method benefits both you and your creditor.
You should not be averse to explain your money and credit situation honestly. By being transparent, you can come to an agreement and one successful negotiation can be the stepping-stone to eliminating your debt.
Debt consolidation is yet another option to get you out of debt. In debt consolidation, you avail of a lower interest loan and use it to pay off all your higher interest loans, for example credit cards. Debt consolidation is a risky step for some, because paying off credit card debt is not sufficient if you give in to further temptations to overspend on your credit card. It is best to stop using credit cards altogether after debt consolidation in context with credit cards. Else, you are in danger of getting into more debt than you were before debt consolidation.
Finally, controlling your expenses is the only long-term solution to get you out of debt. For this, you must first understand what your expenses are. Keeping a record of everything you spend is the only way to ensure that you know your spending patterns. After this, you will have sacrifice many frills in your lifestyle and learn to live on a budget.
Remember that it takes discipline and sacrifice to get out of debt. You can rest assured that enforcing discipline and sacrifice will be worth it, because staying on budget equals investing in your future.
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