Being in debt can be a soul crushing experience. It literally feels like the walls are closing in around you, and every minute you wait only makes matters worse. Debt consolidation, debt restructuring, and even simple budgeting can help though. So if you’re looking for a way out, it’s time to take action!
If you’re looking to escape from debt once and for all, follow the advice below to make it a thing of the past.
Top Ways to Break Free From Debt
Weighing Up the Options – Asking Mom and Dad
When you’re looking to get yourself out of debt, you will no doubt have multiple options available to you. We are going to look at a selection of them below in fact. The question then, is how you know which option to take first?
The answer should be to think about which will get you out of debt the fastest and which will ultimately have the best impact on your finances going forward. Something of a paradigm shift is needed here and it’s important to assess your priorities. In many cases, that means swallowing your pride and asking Mom and Dad.
Assuming you have a Mom and Dad who can help you, this is the first port of call for multiple reasons. For starters, it means that you won’t be taking out another loan to pay off your existing one (stay away from payday loans). At the same time, it means that you’ll be able to get the money immediately and you won’t hurt your credit score.
This is something that many people feel uncomfortable doing, because they feel like it’s asking too much, or because it feels like failing. Recognize though that being in debt is a serious problem and that you have a responsibility to your family (and your future family if you’re single). In this case, swallowing your pride and inconveniencing your parents is actually by far the lesser evil. And most parents would actually agree on that. Don’t suffer in silence – take the bravest step in admitting you need help.
When you’re struggling with debt, it’s of course very important to create a budget and a plan for getting out of that debt and then to stick to said plan. This is often easier said than done and it doesn’t yield immediate results but it can be effective in the long-term and if your budget is comprehensive and you are strict with yourself, it can give you projections for where you will be financially in five months or five years.
Do bear in mind though that there will almost always be unexpected expenses. The only truly successful budgets will be hugely conservative if you have been struggling with debt over the past years.
Transferring Your Debt
This isn’t a strategy to get you quickly out of debt so much as a small tip that can make managing your debt that little bit easier. Still though, every little bit helps so consider moving your credit card debt to new credit cards. This is a good strategy because many credit cards are interest free for the first 6 months or even the first year. By moving your debt to these cards then, you can enjoy a small break on the interest that you have to pay. What’s more, you can repeat this process again as many times as you want meaning that you will rarely have to accrue interest on credit card loans. The only difficulty is if your credit rating is too poor for banks to want to offer you a credit card.
Consolidating Your Loans
Loan consolidation basically means taking out a new loan in order to pay off all of your existing loans. This can sometimes get you into more trouble but in other cases it can be a big help. The basic idea here is that by taking out one loan to pay off your others, you consolidate all those expenses into a single payment. This then means that you don’t have to worry about different amounts of money coming out of your account throughout the month and it makes budgeting that much easier as a result. At the same time, the aim with a consolidation is that the interest on that one new loan is going to be less than the sum total of interest you’re paying on all the other loans. This can also be good for your credit score because it will look as though you successfully paid off lots of smaller loans.
In other cases, loan consolidation can leave you paying higher interest overall and can be damaging to your credit rating. Before taking this option you should definitely shop around and speak to a debt advisor.
Debt restructuring means changing the way in which you are paying back your loans. For instance, this might mean asking a lender if you can pay smaller installments for longer, or if you can freeze your interest for a little while. In other words, if the financial pressure is too great, then you simply ask your lender if you can have something of a ‘break’ for a while.
Why would banks be willing to let you restructure what you owe them? Because they’d rather you paid the loan in its entirety than go bankrupt. In other words, it’s in their best interests too to help you out. Speak to your lenders then, or consider asking an advisor to do so on your behalf.
These days, bankruptcy is increasingly becoming a legitimate option for getting out of debt. It’s devastating for your credit score, so you should certainly consider it a last option but it forces your lenders to restructure your debt and it means you get help with your loans from the state. Bankruptcy is a better choice for businesses than it is for individuals but more and more people are choosing to go this route.
Consider this a ‘last resort’ then – but it can be reassuring still to know that the worst case scenario is still livable!
What is Debt Forgiveness?
On the face of it, student loan forgiveness is just what it sounds like. This is an opportunity to get some money back from your loan1. Often it’s not the entire thing – just a portion – but it’s certainly better than nothing and can make a big difference to your lifestyle if you’re currently paying back large sums of money every month.
So this ‘too good to be true’ sounding deal actually is true. And it’s a good idea to wake up to that fact and not write it off without looking into it! But at the same time, it’s also important to read on and learn everything about it that you can. There are certainly some caveats to bear in mind here and it will help a great deal to know what those are before you leap in with both feet!
How to Apply for Debt Forgiveness
So how do you go about getting debt forgiveness?
Essentially, the way this works is that you take on a new job – and that job offer debt forgiveness. To get the forgiveness then, you need to take that position.
Sometimes this will mean volunteering but this isn’t going to be a good option for most people seeing as they will have other financial commitments.
Alternatively, you can apply for a proper position though with a paid salary. A common example of a type of job that offers this is public service. If you work for federal or local government, or a non-profit organization that is tax-exempt, then you may be able to escape some of your loan.
Other jobs also offer loan forgiveness though. For instance, the automotive aftermarket industry has the SEMA program, while there is also a teach loan forgiveness program.
As you can see, there are many different ways to combat debt. The most important step is simply to take action today though. Move your cards if you can, look into student loan forgiveness… but more importantly just start paying off debts today. Start saving money. Cancel bills. Be proactive! Even the longest journey is made up of lots of tiny steps.