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Best Way to Get Out of Credit Card Debt (2020 Tips)
What are Ways to Get Out of Debt?
- Snowballing Payments
- Consolidation Loan
- Balance Transfer
- Debt Forgiveness
- Receivables Financing (for Businesses)
Debt can happen to anyone. It can happen anytime, for any reason. Economic problems, health issues, or unforeseen accidents can all cause someone to get into debt. That’s why so many people are asking how to get out of debt.
There are a few different ways to erase your debt. It depends on the type of debt. It also depends on how much you owe. Your credit score plays a role in the ways to get out of debt open to you.
This article will tell you how to get out of different types of debt. We’ll cover the best way to pay off credit card debt, student loan debt, payday loan debt, and more. We’ll also look at your options if your credit history is less than stellar.
It’s also important to note that you should do a lot of research on your particular situation before you decide on any one strategy to get out of debt. There may be options we just don’t have the space to cover. There also might be something special about your situation that gives you the chance to work something out with your creditor. Use this information to get out of debt quickly.
Debt Payment Strategies
There are a few debt payment strategies that can work for any kind of debt. These strategies both involve paying off a balance, and then using that money to put toward your other bills. In doing so, you can rapidly start to pay off your debts.
Snowballing Payments to Get Out of Debt – Smallest Balance
One of the best ways to get out of debt as quickly as possible can work for all of your debts. This method is known as payment snowballing. The strategy is fairly simple.
First, make sure you’re making the minimum payments on all of your debts. Next, dedicate as much extra money as you can to paying off the debt with the smallest balance. That should resolve that debt quickly. Once you’ve done that, take the money that was going toward the minimum balance and the extra payments on your smallest balance and apply it to your next smallest balance. Repeat this process with all of your debts.
This strategy works by letting you focus on reducing the number of monthly payments you have to make. Once you get rid of a payment, you free up some money. You can then use that money to put toward other debts. As you eliminate each debt, the amount of money you have to put toward your total debt grows. If you’ve paid off three bills, then all of the money you were spending on those balances can be devoted to eliminating another balance.
The extra money that you put toward getting out of debt this way adds up really quickly. imagine you have 5 balances of $10,000. Each balance requires you to pay $100 per month. Once you’ve finished off one balance, you can devote $200 to the next balance. Then you can devote $300 to the balance after that.
The debt snowball process may seem slow at the start. However, it rapidly increases the amount of money you have to pay your debts. Things kick into high gear once you’ve paid off your first balance. That’s why you should always start with the balance that’s smallest. It frees up more money to cover debts faster.
Snowballing Payments to Get Out of Debt – Highest Interest
The next way you can use this strategy is by focusing on the balance that has the highest interest rate. This approach is good because the balance with the highest interest rate is likely the largest bill you pay each month.
Moreover, this method saves you the most money long term. That’s because more of your money goes towards paying your debts and less goes to making interest payments.
Focusing on the balance with the highest interest rates doesn’t always work as quickly as focusing on the smallest balance. However, it’s a great choice if all of your debts are about the same size. Getting rid of the balance with the highest interest rate quickly lowers your monthly bill. That means you can apply even more money to the next balance.
How to Get Out of Credit Card Debt
Credit card debt is one of the most common kinds of debt for people to have today. Credit card debt happens for lots of different reasons. You might need a credit card to cover an unforeseen expense, medical bills, or accident. You also may have taken out a credit card with the best of intentions, but instead used it irresponsibly.
No matter how you got into credit card debt, the important thing is getting out. There are a few different ways you can approach credit card debt. We’ll look at some of the most common and effective
Credit Card Consolidation Loan
The first way to get out of credit card debt is with a consolidation loan. Most people don’t realize that the thing that makes credit card debt so challenging is the high interest rates you pay on the card. These interest rates can cause your balance to quickly balloon. That makes getting out of credit card debt a difficult task.
Also, most people with credit card debt problems have more than one card or account. That means that you’re putting money towards multiple different interest payments. This means that you’re never actually paying your debt down. Instead, you’re just paying off interest.
A credit card debt consolidation loan lets you put all of your debt into one place. Also, consolidation loans have lower interest rates than credit cards do. That means you can pay off your debts faster.
Getting a consolidation loan can also have a positive impact on your credit score. It lowers the amount of your total revolving credit that you’re using. That causes your score to go up.
It’s important to note that some people might have a hard time getting a consolidation loan. Thankfully, you can use tools like pre-approval to see if you can qualify for a consolidation loan without having to take a hit on your credit score for an inquiry.
Credit Card Balance Transfer
A balance transfer credit card is another way to get out of credit card debt. Balance transfer cards are special types of credit cards. They have low interest rates. They usually have an introductory period with zero interest. You transfer the balance from your other cards to the new balance transfer card.
Once you’ve transferred the balance, it’s important to stop using the old card. At the very least, you shouldn’t be using it regularly. After all, that would just build up more of the debt that you’re trying to eliminate.
The reason that balance transfer cards allow you to pay off your credit card debt quickly is because they don’t have as high of an interest rate. That means more of your payment goes towards the balance on the card.
The fact that the balance transfer card has a zero or low interest rate means your payments will actually go toward paying down your balance. That means you’ll get out of debt quickly. It also helps to boost your credit score by reducing the percentage of the revolving credit you’re using.
Furthermore, if you can pay off your balance before any introductory period ends, then you’ve essentially gotten free money. After all, the new card company didn’t make any profits from interest on your balance. And you’ve reduced your balance to zero. That’s a great deal for consumers, and one worth looking into.
How to Get Out of Student Loan Debt
Student loan debts are the fastest growing form of debt in America. The cost of going to college has skyrocketed in recent years. Also, more jobs require a college degree than ever before. That means more Americans are taking on more college debt.
College loan debt can be hard to get out of. You usually can’t discharge student loans in bankruptcy. Also, college loan companies are famous for being sticklers about collecting debt. You do have a few options though.
Student Loan Consolidation
Your first option for getting out of student loan debt is a student consolidation loan. This works much like a consolidation loan for credit cards. Instead of paying back multiple student loans with different interest rates, you get one loan. That loan pays back all of your student debt and makes it easier to keep track of your bill. It also can have a lower interest rate than student loans. That means you’ll pay your debt back faster.
Student consolidation loans have some restrictions. Most banks and lenders require you to have finished your degree to be eligible. Also, you need to have proof of income and a high enough credit score. However, for many students, a consolidation loan is the best way to get out of student debt quickly.
Student Loan Debt Forgiveness
Another option for getting out of student loan debt is student loan debt forgiveness. These programs are sponsored by various governments. They require you to work in the public sector. One of the most common examples is teaching. If you agree to teach at eligible schools, then your student loan debt is forgiven. The amount of time you need to do the job depends on the program you’re in.
Debt forgiveness is one of the best ways to get out student loan debt. It means you don’t have to finish paying your student loans. That saves you a pile of money, even when compared to loan consolidation.
How to Get Out of Payday Loan Debt
Payday loans can be tempting. After all, sometimes you need money fast and can’t wait for your next paycheck. The problem with payday loans is that they can quickly spiral out of control. These loans have terms that cause the balance to increase quickly.
The best way to get out of payday loan debt is to consolidate your debt with another lender. Banks offer better interest rates than payday loan companies. That means you can pay off your balance while spending less money on interest. The result is that you’ll get out of your payday loan debt much faster.
Another strategy for payday lenders is to seek a debt settlement. That’s when you agree to pay less than you owe. You pay the amount in one lump sum. That can make it hard for some people to pull off. Also, your lender isn’t likely to accept a debt settlement unless you’re already way behind on your payments. However, if you can do it, then it will get you out of payday loan debt quickly.
How to Get Out of Debt Fast with Bad Credit
Getting out of debt fast with bad credit is a challenge. However, many people find themselves in exactly this situation. There are generally two main strategies for getting out of debt with bad credit. The first option is to use credit repair methods to rebuild your credit.
Once you rebuild your credit you’ll have access to things like consolidation loans. These loans offer a great way to start making real progress on your debt. They have lower interest rates. They also help boost your credit score over the long term.
The other option for getting out of debt fast with bad credit is to declare bankruptcy. It’s important to note that bankruptcy should be seen as a last resort option. The reason is because declaring bankruptcy dramatically lowers your credit score.
However, if you have bad credit already, then a lowered credit score won’t impact your life that much. Also, the bankruptcy will eventually come off of your credit report. That means you can start over with a new financial future.
Bankruptcy can be difficult to go through. The courts will assess your earnings and your debts. Your assets may be seized by your creditors. However, you’ll receive protection from your debts. That means no one can ever force you to pay them back once they’ve been discharged. Even if you win the lottery and become a millionaire, debts discharged in bankruptcy are considered closed.
How to Get Out of Debt Collection
Debt collection is a nightmare. People call you all day, every day. They ask for money you don’t have. After all, if you had the money, then you’d have paid the bill.
Given this, it’s not surprising that so many people want to get out of debt collection as quickly as possible. There are a few things you can do to stop debt collection calls from happening.
First, there are federal rules and regulations that restrict how much debt collectors can contact you. If you’re being harassed by debt collectors, then you may have a legal case against them.
Second, you can work out a payment plan with either the debt collection agency, or the original lender you owe money to. A payment plan can lower your monthly payments. Moreover, they get the phone calls and threatening letters to stop.
A payment plan also lets you get out of debt without undermining your other bills. Any good payment plan will take your other obligations into account. That means you’ll only have to pay what you can afford.
It’s important to note that you should be careful when dealing with debt collection agencies. Some agencies collect on debt that is expired. This is known as “bad debt”. If someone hasn’t made a payment on their debt for a certain period of time, then that debt can’t be collected anymore.
Another thing you need to do with debt collection companies is verify that you actually owe the money they’re trying to collect. Mistakes happen. Including mistaken identities. There’s a chance that the debt that’s being collected is actually owed by someone else.
Because of bad debt and mistaken identity, you should always verify the debt a collection company claims you owe. You can do this for free by going through any of the major credit reporting agencies. They’ll send a formal request to the debt collectors. The debt collectors need to show a specific paper trail that proves you owe the debt in question. They also need to show that the debt belongs to you and that they have the right to collect it.
As a result, this can get you out of debt, and can certainly get you out of debt collection. After all, the burden is on the company to prove that you owe them money. If they don’t have the right paperwork to do so, then that’s their loss.
How to Get Out of Business Debt
Owning and operating your own business can be incredibly rewarding. However, any business can fall on hard times. The recent economic crisis shows that even the largest companies aren’t immune from business debt.
Business debt can close your business. Even if you stay open, debt payments can make it impossible to grow your business. After all, the money you put towards debt is money you’re not re-investing in your business.
That’s why so many business owners are looking for how to get out of business debt. There are a few options available. Consider each carefully so that you can choose the best option for your business.
The first option is a business loan. This option only works if you can get a loan that comes at a lower interest rate than you’re already paying. However, if that’s the case, then you’re in a good situation.
You can use your new loan like a consolidation loan. Pay off your outstanding debts and consolidate them into one, easy to make payment. Also, since the loan is at a lower interest rate, more of your money will go toward the balance and less will go toward paying interest.
Something to consider is that your business will likely need to put up some kind of collateral for this type of loan. That collateral could be anything of value. Banks might even request an ownership share of your business as collateral. That means if you fail to repay your loan, the bank can seize your collateral.
This can put a business in a sticky situation. Usually, the most valuable things a business owns are also the most important to conducting the business. For example, if you have a delivery service and use your truck as collateral, then your business is pretty much finished if you fail to keep up with your payments.
Another option for getting out of business debt is receivables financing. Any business owner will tell you that getting paid for the goods and services your business provides is almost as hard as running the business itself. You usually have clients that owe you money. Moreover, you might have to offer generous terms on invoices. That means some clients might not pay for as much as 60 days after you’ve delivered your goods or provided the service.
Receivables financing is the process of selling that debt to another party. One example is invoice factoring. When you factor an invoice, you sell the rights to collect on that invoice. The invoice factoring company pays you a percentage of the invoice up front, usually at least 80%. Then your customer pays the invoice factoring company. Once they’ve been paid, the invoice factoring firm pays the rest of the balance out to you, minus a discount fee for the transaction.
The effect of this is to get you the money you generate faster. Faster access to funds means you won’t have to take on as much debt. It also means you’ll have the money on hand to pay your debts off more quickly.
As you can see, figuring out how to get out of debt is no easy thing. But, with basic strategies and understanding the options available to you, it is possible. The best option is always to find a payment strategy. If you can’t do that, figuring out how to consolidate your debts is the next best step. Bankruptcy and debt settlement should always be a last resort. It’s your financial future, take control of it.
Debt is one aspect that cannot be overlooked. There are times when you have to take some loans to offset bills. The downside is inability to repair when due. We have put together some facts you should know before taking steps to obtain a credit card loan.
These had been divided into relevant sections to make the task of locating the information you seek easier for you.
This section takes you through the journey of understanding what credit card debts are. After this, you will also find other information that will help you obtain loans without any hassle. There are also other debt processes such as debt settlement that you need to know about.
How to get a debt consolidation loan?
You can get a debt consolidation loan from your bank or third-parties such as credit unions. Your loan request typically gets granted if your credit score is good. If you go with a private company make sure they are one of the best debt consolidation companies BBB accredited.
What happens when credit card debt is not paid?
Can you get a grant to pay off debt?
Is Debt Settlement really worth it?
Debt Repayment Process
Paying off debts is one problem that had left many in the wild. Debt collectors hardly take excuses and can go the extra mile in getting their funds back. In this section, you will learn the best ways to pay off your debts in good time.
How do I begin to eliminate debt?
Increasing your monthly repayment plan and go through credit counseling to start the process of eliminating your debt.
How can I get out of debt and stay out of debt?
Saving ahead of time will help you pay off your debt in real-time. You can easily dip hands in set aside funds to repay your debt. Debt consolidation loans with low interests are also viable. Also consider increasing your income.
How can I get rid of credit card debt legally?
Apart from reducing expenses, you can also offset credit card debt legitimately by paying off debts with high interest rates before others. Selling off used items is not advisable; you can instead increase your income. You can also seek out credit card debt relief services to help you with this.
How can I pay off debt quickly and save money?
There are proven ways to get out of debt in real-time. You have options of using the snowball method – paying off debts with high interest rates. This allows you have less stress offsetting debt with lower interests. Also learn more about the pros and cons of debt consolidation programs.
How can I settle my credit card debt?
Try cutting down debts that a debt collector must have inherited from your earlier creditor. Releasing huge funds at a go might soft-pedal your collector. Keeping your credit card debt away from becoming a zombie debt is another way to settle your credit card debt.
How can I get rid of debt fast?
If you have old items that won’t be needed soon, you can sell them off to increase your income. Alternatively, pick up a side job and work extra hours to meet up with your debt repayment plan. Debt relief companies can help speed this process up sometimes. For example, learn more about Freedom Debt Relief: Does Freedom Debt Relief work?
How can I reduce my credit card debt?
Start paying off huge debts before moving to low debts. Also look for alternate income that allows you pay off faster.
How do I get out of credit card debt without running my credit?
One of the quickest ways to get of credit card debt without hurting your credit is leaving within your means. You can also opt for debt consolidation and obtain loans at low interest rates.
How to get out of debt with bad credit?
You have options of debt consolidation by bringing in a new loan with low interest to pay off your high interests rate debt. You can also start living on budgets; cutting off unnecessary spending.
How do I clear debt quickly?
There are many channels you can explore in paying off your debt faster. Extra income will be boost to clear debts quickly. You can also pay off high interest debts first.
How to get out of payday loan debt?
You can explore other loan lenders. Consider working with other lenders or simply take a cosigner to stand in for you.
Is it better to pay off debt or save money?
If you’re saving money to pay off your debts at a go, it is advisable you pay off debts in bits. Saving money only accumulates your debts and increases the interests. It is better to pay off debts than saving money for debt repayment.
How to get rid of credit card debt legally?
Negotiate with the Credit Card Company or start cutting off unnecessary habits that cost you money and use saved funds in offsetting your credit card debt. Use a paying off credit card debt calculator to see what kind of payments you need to make to pay off the cards in a reasonable amount of time.
How can I get out of debt on my own?
Your first step to getting out of debt on Do It Yourself (DIY) method is realizing how much debt you got plunged into. After this, avoid behavioral patterns that got you into debt and start working on extra jobs to increase your debt repayment.
There are risks you might come across if you fail to meet up with your repayment process. Most times, the creditor transfers your portfolio to a collection agency and the agency pays off your debts and tasks you to complete your debt repayment.
In severe cases, you might get served papers and stand the risk of losing your account. These are some of the downsides of not paying back in good time. In this section, you will discover some debt risks and best methods to overcome them and have your credit card back.
What happens when you get served papers for debt?
Responding the debt collection suit papers is the best thing to do. Before responding, make sure you answer to the allegations to the best of your knowledge.
Can you go to jail for not paying your credit cards?
It is rare to go to jail for not paying credit cards. Though collectors can threaten you with lawsuits, you can only be charged to civil courts and charged fines.
Will settling with a collection agency hurt my credit?
No. Your credit score only gets affected when you didn’t meet up with your repayment plan; forcing your creditor to sell your debt to a collection agency. When collection agencies get hold of your debt settlement, you’re in to have your credit hurt. That's why we reccommend you only work with highly repuatable companies that have been throoughly reviewed. One such company and review we cover is National Debt Relief BBB reviews. For years the BBB has been a respected source of reviews. Choose wisely.
Can they garnish your wages for credit card debt?
Your wages might be garnished (taken over) if a credit card company obtains a lawsuit to that effect and have you sign the wage garnishment document. Wage garnishment is quite rare but is only taken as last resort when you cannot meet up with credit card debt repayments.
How does personal responsibility affect credit?
Your personal responsibility is all about other aspects that you spend your funds on. If you fail to make timely payments to offset your debt, your credit score is likely to be in the red. The best approach is cutting down unnecessary expenses and focus on your debt repayment before tackling other personal responsibilities.
Debt Repayment Options
You can also use other means to pay off your debts. There are options to repay your loan even without funds to do so. This section covers alternate methods you can explore in paying off your debts.
How can I get out of debt with no money?
Many debtors have erroneously believed that they cannot pay off debts without funds. You can get out of debt without money by using debt financing. The method allows you obtain loans at low interests and pay off debts with higher interests.
How to get out of debt on a low income?
Cut down costs and use alternate methods to finance your daily existence. For instance, you can trek some miles before catching a train. You can also put some money away; this will help you have extra funds for your debt payments.
How can I pay off my debt if I'm broke?
Reduce the funds you spend on non-relevant luxury. Also consider alternate income that will keep you afloat while repaying your debt. You can set aside funds for the rainy day such as emergency fund.
How to get out of credit card debt without paying?
Start by paying off one credit card at a time. Having a side job will increase your chances of pulling out of credit card debt faster.
How to get debt written off?
You can get your debt written off by not paying within the period of six years. If your creditor didn’t pull the legal strings within this time, then your debts are as good as written off.
Does debt get written off after 6 years?
If you have been bothered on paying off your debt, you can heave a sigh of relief after six years of getting into the debt. Debts are usually written off after 6 years of incurrence if the creditor did not file a lawsuit within the period and if have not made any payment for the debt within this time. Such debts are considered statute barred and are written off after 6 years.
What does living paycheck to paycheck mean?
Living paycheck to paycheck is a financial term that involves an individual’s inability to set some funds aside. In the event of a job loss, such persons remain insolvent because they lack liquid assets to sustain their expenses.
How do I stop living paycheck to paycheck?
Great steps to stop paycheck living is saving some funds as you work. Also cut down unnecessary spending. Living on budget is also better way to save specific funds at intervals.
How do I pay off debt if I live paycheck to paycheck?
Cutting down your expenses allows you save more funds that will help you pat off your debt in good time.
When you get married do you share debt?
You cannot share debts when you’re married if such debts were incurred by your spouse before marriage. However, a debt that had been incurred after marriage is considered as shared debt and both spouses become responsible for the repayment.
Can you negotiate a lower payoff amount on a credit card?
Yes, you can. But that is only if you’re not financial buoyant to pay off your debt at a go. Some companies decline such requests if valid proofs are not tendered. So, make sure you cannot foot all bills before applying for a cut from your credit card.
What debt should be paid off first?
You might have obtained loans from different companies. When paying off these debts, start with those that have higher interest rates. You can also pay off debts from companies that threaten legal suits.
How effective are snowball debts?
Snowball debts are efficient ways of paying off debt if you’re working with a budget. Snowball debts allow you start your debt repayment process with debts of high interest rates.
How to get out of student loan debt?
Though filing a bankruptcy might seem the best route, you can pull out of your student loan debt by working in a public service agency or opt for income-driven repayment (IDR). There are a number of debt consolidation student loans options.
How to get out of title loan debt?
Try negotiating with your lender or sell off some properties to raise funds. Optionally, you can take up low interest loans to repay your title loan debt in good time.
How to get rid of medical debt?
You can cut down expenses and have more funds to offset your medical debt. You can also seek medical bill forgiveness if you’re not buoyant to foot the bills.
How to get out of debt in a year?
Determine the value of your debt and start saving towards it. Applying for reduced interest rates and paying off in bits will also help.
How to use debt to get rich?
You can obtain loans and invest in booming enterprises. Profits amassed can be used to repay your debt, pay off tax and still have some funds in your hands. Debts can be used as tool to wealth if the right approach is taken and if the loan terms are favorable.
Debt Collectors and Debts
Debts are duty you must complete. However, there are debt collectors that will keep you on your toes till you pay off what you own. Debt collectors go the extra mile such as making contacts with your family and taking you to court to get their funds back. In this section, you will learn how to avoid friction with your debt collectors.
How to get rid of debt collectors?
You can take off a debt collector from your credit report if the debt you got served is not yours. You can also you can do away with debt collectors after the seven-year debt credit report had stayed on your credit report.
How do debt collectors get your cell phone number?
Debt collectors can get your cell phone number through a close friend or having your identity revealed if you put a call first. They can also surf the internet with some information about you and obtain your cell phone number without hassles.
How do debt collectors get family members phone numbers?
Debt collectors can peruse your social media handles and get access to relatives’ cell phone numbers.
Credit Score and Report
Debt figures can negatively affect your credit report when not paid in time. There are also durations they can stay on your credit report before they will be taken off. This section covers some answers on debt and credit scores.
How long does debt settlement stay on your credit report?
Debt settlement typically stays on credit reports for seven years after debts in your account must have been settled.
Can paying off collections raise your credit score?
Yes, your credit score can be raised if you pay off collections on time.
Does paying off debt hurt credit?
Offsetting debts does not hurt your credit score if you paid in time. If you had delayed payment or paid off in small fractions, then your credit is in for some low grades even after debts have been paid off.
How can I get rid of credit card debt without hurting my credit?
You can do this by paying off your debts on time and obtaining only loans that have low interests. You can also see if your state has a credit card debt relief government program to help its citizens.
How can I raise my credit score in 30 days?
You can strike negotiations with your creditor and pay in parts. You can also off using snowball method; paying off high bills first.
Carl has years of experience helping people tackle debt. As a Senior Financial Advisor, he knows the ins and outs of debt consolidation and debt management. He holds a Masters Degree in Finance and according to him, not all debt problems are the same and that’s why it’s important to take a look at the different options available for your situation.