Do you want to get out of debt once and for all but just don’t know how to do it? In this article I’m going to cover three ways you can cut your debt down and save a ton of money in the process.
The first option you should consider is a do it yourself debt settlement plan also known as the debt snowball plan. The great thing about this plan is that it doesn’t cost anything do this plan and it can even improve your credit standing as you go through the plan.
To get started line up your debts from the lowest balance to the highest balance which should be your mortgage if you have one. Next you will want to pay the minimum payment to each debt except for the debt with the lowest balance. With that debt you’ll want to pay as much extra cash towards that debt as possible until it is paid in full. Once the first debt is paid move on to then next debt putting as much extra cash towards that debt as you can and paying the minimum on all others. Do this until all debts are paid.
The next option is to consider a debt negotiation company. Debt negotiation companies will work with your creditors to help cut down the amount of debt that you owe. In some cases they may be able to cut as much as 50% of your debt off, saving you time and money.
However their is a few things you should know about these companies. First these companies tend to charge around 15% to 17% of the total amount of debt that you place in the program. Secondly, these plans can have some negative effects on your credit score, driving your credit score down. Finally, any debt that is not paid back to your creditors will be taxed.
The last option is debt consolidation. With debt consolidation you are not eliminating your debt but rather combing all of your debts into one big debt. Their are two big benefits to combining your debt. First off, if you combine it in the right place such as a second mortgage or a cash out refinance you will get a lower fixed interest rate, instead of higher variable rate. Secondly, by combining your debt with your mortgage you’ll also get a tax benefit on any interest you pay on your debt.
In the end these three debt relief options can help you get debt free over time but you also need to understand the risk of each one as well before you get started.