How to Get Out of Debt

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By eHow Contributing Writer

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(66 Ratings)

Getting out of debt is challenging, but it can be accomplished with dedication and perseverance.

Difficulty: Challenging

Instructions

Things You'll Need:

Step 1

Cut up your credit cards except for one or two to use for emergencies. Throw away the pieces.
Step 2

Cancel all of your credit lines and request a lower interest rate on the debt you have left.
Step 3

Transfer as much debt as possible to the credit card that has the lowest interest rate, or get a debt-consolidation loan from a bank at a lower rate.
Step 4

Use cash for all your purchases, and only buy what you can afford.
Step 5

Commit to start paying off your debts one at a time and do it. Pay off the credit card and loans with the highest interest rate first.
Step 6

Double your payments on the next debt by taking the payment you made on the first debt and adding it to the current debt.
Step 7

Triple your payments on the next debt by combining payment amounts. Continue until all your credit cards and other debts are paid off.

Tips & Warnings

Invest in personal finance software to accurately track your spending and identify problematic habits.
If you have investments that are paying 6 to 10 percent but a credit card debt with an interest rate of 17 to 21 percent, cash out your investments and pay off your debt.
Ask your creditors how much repayment is needed before they are able to send a favorable report to credit agencies. Sometimes they will accept less than your total debt.
Use consumer credit agencies to arrange repayment of debt. Many are free.

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Comments

rosemarymuffins said

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on 10/27/2009 Great Tips! Debt can be an awful downward spiral, i am embarrassed to say i had all my credit cards maxed out at one point. I was in deep trouble until my friend recommended i get a free debt repair consultation, i was able to overcome my credit card debt with their aid within a year. Heres a link where i got a free consultation i thought i would share it to help everyone, http://cli.gs/free-debt-repair

rosemarymuffins said

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jenae75 said

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on 10/13/2009 Good advice! The one thing I would add is that if your creditors offer to lower the amount you owe or cut the amount you owe, by law they have to report the rest as income earned to the IRS and come tax time you may have to pay in or receive less of a refund.