One in every three households carries credit card debts from one month to next (National Foundation for Credit Counseling). While some manage their debts well, others find them an oppressive burden that makes them juggle with minimum payments every month while evading calls from other creditors. The debts are increasingly pushing many to the verge of bankruptcy.
If you are at a point that the debts have become overwhelming, it is time to make prompt and drastic measures that will ultimately free you. Here are five strategies that you can use to get out of debt.
Climb down from the debts using the debt ladder
To use the debt ladder method, you have to attack the debt balance starting with those that have the highest interest. While you focus and pay more on the account with greater interest, you must keep paying the minimum payments to other accounts with debts. Once the debt with the highest interest is cleared, you climb down to the next step in the ladder and apply the same strategy to the next high-interest debt. The process is followed until the entire debt is cleared. Over the long term, this strategy will help to save you cash because the high interest will not accumulate.
Use the debt snowball strategy
The debt snowball is another unique method that can help you accelerate towards clearing all the debts. Unlike the debt ladder that considers clearing the debts with high interest first, this strategy is based on building momentum by focusing on small debts first. This means that you put all efforts towards clearing the small loans while maintaining minimal payments to other higher interest loans. The overall impact is that you will clear the small loans fast and use the motivation to keep clearing others.
Ask your creditors for assistance
While many people are worried about the debts, few understand that the creditors are willing to offer assistance. For many creditors, the focus is seeing their clients grow from one glory to another and attracting more clients. The best moment to look for assistance is before the debts spiral out of control.
Talk to the creditor and share the details of the recent job shift and the reduced salary. Tell them of your effort to build a new stream of revenue to augment the current debt, and they will be very fast to assist. Make sure to be honest, creative, and open-minded to get assistance from creditors.
Seek help from a debt counselor
If the outlined strategies are not working, the next best alternative is seeking help from a credit counselor. Though there are some not-for-profit credit counseling organizations, some charge a fee for their services. The organizations identify a counselor to work with you until all the debts are cleared.
The counselor helps you understand the current situation and then work out on all repayment options. Ultimately, you and the counselor will draw a debt repayment plan that will be foreseen by the counselor. He/she will reach all the debtors and agree on the repayment process such as timeframes, negotiate on interests, and get the best for you. Note that the plan might include some drastic measures such as canceling credit cards to reduce additional bills.