How to Get Rid of Debt

If you owe any type of debt, the idea of paying it off might feel overwhelming. Part of the reason for this is that debt usually comes with an interest rate attached, forcing you to pay more than you borrowed to get rid of the debt. There are strategies you can use to pay off your debt, but you must have the discipline to follow them or your debt may spiral out of control.

Instructions

1. Stop borrowing money. The first step in getting rid of debt is not to incur any more more of it. Thanks to the interest rate on whatever loans you have outstanding, you are already getting into more debt every minute you owe money, even if you don't take on more. Incurring more debt while you are embarking on a debt elimination plan will only make your debt reduction strategy more difficult to implement.

2. Pay off your highest interest rate loans first. If you cannot afford to pay off all your debt immediately, start by applying the bulk of your payments toward loans that charge the most interest.

3. Negotiate better terms on your debt. Regardless of the type of debt you owe, you may be able to convince your creditors to lower the interest rate they charge on your debt. Negotiation may be easiest with credit card issuers, as credit card debt can often be moved fairly easily to another issuer who offers a lower rate. Every percentage point you can negotiate down on your interest rate can help make it easier to get rid of your debt.

4. Consolidate your outstanding debt. If you can't get your interest rate lowered through direct negotiation, find another lender who can offer you a more competitive rate and consolidate your outstanding loans.

5. Make larger payments. Making larger payments can vastly reduce the time it takes to pay off your debt, even if the payments are only incrementally larger. If you are only paying the minimum payment required by your lender, you are delaying the time when you will be debt-free. If you are serious about getting out of debt, review your budget to find areas in your life where you can cut back and apply that money toward debt repayment.

6. Consider bankruptcy. If getting your interest rates lowered and making large debt payments still is not enough to make progress toward getting rid of your debt, you may be a candidate for bankruptcy. Although bankruptcy costs money and damages your credit report, if you earn a discharge, you can emerge from bankruptcy without any debt at all.

References

• United States Courts: Discharge in Bankruptcy
• The Motley Fool: How-to Guide -- Reduce Your Debt
• "Kiplinger"; How to Negotiate a Lower Credit-Card Rate; Kimberly Lankford; August 17, 2010
• Federal Trade Commission: Facts for Consumers -- Knee Deep in Debt
• The Motley Fool: Nine Ways to Pay Off Debt