Debt is so prevalent in today’s time that almost everyone knows about it and to some great extent, experiencing it. There is hardly ever a lack of debt story and how they got to that situation. There are a lot of possibilities that could have lead to being in debt but the better angle to those stories is how they got out of debt.
There are various options to get debt relief and you may or may not opt to hire a professional to help you out. If you do plan to get out of debt on your own, there are a couple of options available for you.
4 Do-It-Yourself Debt Solutions
Just as there are factors that contribute to being in debt, there are also solutions in getting out of it. Though they may seem easier said than done, these programs offer a concrete roadmap on to living debt-free. Here are 4 do-it-yourself debt relief programs that you can explore to get out of your present debt situation.
DIY Debt Relief 1: Snowball Method
The snowball method is the first of the four options that you have for a DIY debt solution. What happens is you make a list of your debt and rank them based on your priority. It can either be the one with the highest interest rate or the one with the lowest balance. Actually, the term snowball is more associated with prioritizing the lowest balance while the highest interest rate is known as the avalanche method. But whether you choose the snowball or avalanche method, you go through the same process.
The first thing you have to do is put together the list of payables you have according to your chosen priority. The next is to jot down the part of your budget that is allotted for the monthly payments.
As you spread the payments across all your debt, any extra money should go to that debt item on the top of your list. The idea is to pay this off ahead of the others. After you do this, the money allocated for the top debt can go to the second one in the list. As you complete payments ahead of schedule, you can repeat it until everything on your list is paid in full. This DIY works best for people that are still able to make their monthly minimum payments – plus more.
DIY Debt Relief 2: Debt Consolidation Loan
The name says it all – consolidation of debt. The idea is to get one loan to pay off all your existing debt and concentrate on that single payment. To make this happen, the first thing you need to do is to take a close hard look on your debts and determine how much you need to pay off all of them. Next is to decide the type of loan you will use to pay off your existing ones but choose the one you are most comfortable with – signature loan, peer to peer or others.
After deciding on this, compile all the documents needed and with a lending institution in mind, submit your application. Once approved, pay off all your debts at once before you even get the chance to use up the money for other items. With debt consolidation, you concentrate on one single payment, one interest rate, and one due date. What you need to accomplish is that the payment you are making for this DIY debt solution should be lower than all your previous payments combined.
DIY Debt Relief 3: Balance Transfer
A big chunk of the debt types are credit card based and one great DIY debt solution for this is balance transfer. What you need to do is be on the lookout for an introductory zero interest balance transfer of a credit card company. This is usually done to entice customers to use the new credit card. As soon as you find one, you can transfer your card balance over to that card and just pay a small percent to the balance.
As soon as you accomplish this, pay as much as you can during t zero interest rate period. This is to significantly lower down your principal amount. This lowers down your debt amount and when the interest rate is back. the monthly payment will be lower because of a reduced principal amount.
DIY Debt Relief 4: Debt Settlement
Debt settlement is the last option for getting out of debt on your own. This works best for people who are in a financial bind and unable to make the minimum monthly payments to the creditors. What you will do is to try to save up for a settlement fund that you can use to negotiate with your creditors. The idea is to call your creditors and offer them this money to complete the payments on your debt – even if it is a smaller amount than what you owe. Whatever this amount cannot cover will be forgiven by the creditor.
This debt relief program is appealing to most consumers because of the debt reduction. However, you have to understand the risks involved here. There are instances when the creditors will drag out the negotiations and it can also damage your credit score. It all depends on the agreement you will reach with the creditor. If you get them to agree to accept your settlement proposal, then the whole program is considered a success.
Tips when getting out of debt on your own
Doing your own debt relief efforts is tough but it is possible There are some things that you may want to work on to help your case, though. Here are some tips that we have if you want to save on service fees.
Know the process. Knowledge will help you where you lack in experience.
Get the tools that you need. You have a lot of tools online like personal finance calculators that will help you with the computations that you have to make when making a decision. When searching through Google, the top three personal finance calculators found on the search results are from Yahoo Finance, Fox Business and Bankrate.
Learn your lesson. It is not enough that you pay off what you owe. It is also very important to know what went wrong before and how you can correct it.
Create financial plans. You will benefit greatly from making plans to help organize your debt relief efforts. Among the first that you should use are budget and payment plans.
- Implement the necessary changes in your life. Obviously, something has to change. You may want to analyze your lifestyle to make sure that you will not get yourself into the same situation again.
