How can I get out of debt – Is it really possible
With so many people struggling with debt we often get the question of how can I get out of debt by our customers. For this reason we are going to break down some strategies with both their pros and their cons. The debt industry is riddled with products and solutions that are supposed to help you handle your debt but they are not all created equal.
It is highly recommended that you research your options carefully before picking a product to make sure that is going to be the best to meet your goals.
Do payday loans help with debt reduction
Payday loans are generally very expensive and not designed as a long term solution, if you are finding your self needing to utilize them often some serious changes in finances need to happen. This option should be considering as last resort option and avoided all together if possible.
PRO: The only advantage is it allowed getting your bill paid
CON: These are very expensive and you run the risk of getting into a cycle of needing them to survive.
Do debt management firms work
Let us handle your debt, sound familiar ?. All in all debt management solutions can work for you, but you should keep the following in mind when considering your options. When you enter into this type of agreement you end up paying that firm who in turn pay down your debts to your creditors, and in most cases your creditors will require the cards to be turned off in the process. While it will help you reduce your debt as you will not have the ability to charge the cards anymore, what the longer term effects.
PRO: This will help you drill down your debts and may even get a reduced amount if it can be negotiated
CON: You will likely see a hit on your credit from the cards that were all just closed, so unless you have no other options you will want to way this options heavily. You will be also paying a maintenance fee to the company that is handling the accounts, which you be utilizing to handle the debts yourself so may be considering a waste of your money.
This is a process you can handle yourself with your cards directly, even though they will still close all the cards it will at least save you the extra money on fees and you may even be able to negotiate better terms or a reduced payoff amount. They will generally work with you as long as you are coming to the table to work with them as well.
How can I get out of debt with a consolidation loan
Debt consolidation loans in general always seem very enticing, as you normally can lower your payment from your currently paying. However, in saying that you do have to understand the dangers they pose you and how to avoid them for this strategy to benefit you in the long run. Typically, the numbers look good in the beginning due to the way the loans are structured, but when you break it down long term you will be paying more front end interest which defeats the purpose of doing the consolidation in the first place.
If you plan accordingly and keep your payment high on the consolidation loan then it can likely get you out of debt quicker than when the loans were separate.
PRO: You will have fewer accounts to manage so fewer checks to write.
CONS: You will be paying down possibly a bigger amount and this is what gets most people. They end up needing to purchase something unexpected before really paying off the current debt.
Careful management of your consolidations can be effective if done properly. I will be explaining another method shortly that you can implement on any interest bearing account that should help you greatly reduce the over all cost of any loan.
Using a 401K program to help you pay down debt
In a lot of cases your 401K program will allow you to take funds from the 401K, this is very effective if you have a lot of high interest debt you are attempting to erase. The funds will need to be paid back to the fund but will hopefully allow you to eliminate the debt burden and cost of keeping the debt.
PRO: Quick payoff of expensive debt
CON: The money is not free and does need to be paid back but potentially worth it in the end
What is the best way to implement the debt snowball technique
The debt snowball is a powerful technique taught but many financial analyst and for good reason it works. I would however like to add a spin on that technique to make it even more efficient and allow getting out of debt even quicker than expected. I am going to explain a process that you can do yourself to each interest bearing account to greatly reduce your overall interest cost and time frame .
Let’s say you have six accounts and several years left getting through all that debt which I imagine is currently in the banks favor. The process is rather simple once you understand what it is doing and how it benefits you short and long term.
In this example we are going to convert your first account over to a more efficient method for you and increasing your principal payment every month. So my first debt is $1000.00 with a payment of $65.00 of which they get half in interest which means you lose 32.50 per payment. These are made up numbers but if you look at your statement you will get the idea of what is effecting your current payments.
The conversion process works like this and only has to be done once on each account. Say your payment is due on the 30th of every month, make sure it is paid ahead of that date and as soon as the next month rolls over make the payment again. This account is now current for that month and would not need to be paid again until the beginning of the next pay cycle but again at the beginning of the cycle instead of the end. This has huge impact on your average daily balance and thus the interest that you are charged will be lower resulting in a higher principal payment each month.
Now that you have converted the account pay minimum on all accounts accept the lowest balance one in which you will be paying as much as you can to reduce it faster. Once you pay off your lowest balance card move the payment up to the next lowest card and you will see even better performance.
It will make sense to do the conversion process on all your cards because even at the minimum payment you will still have better performance. This will relate to huge saving to you and years potentially taken off of your time to pay off your debts.
PRO: You will see dramatic debt reduction and will save lots of your hard-earned money
CON: I really don’t see a downside to this unless you have an emergency that distracts you from making the payments.
How did we get so much debt – Was it really worth it.
It goes without saying that nobody likes debt, but we all have it and if like most people it tends getting out of hand. Does that mean we need to suffer year after year trying to correct the issue, and I think we all know that answer. The information provided here will hopefully give you a good guideline of possible ways you too can get a hold of your debt once and for all.
I look forward to seeing your comments and suggestions on possible content that I create for you all, or if you have followed any of this info and how has helped you.