Are you struggling to pay off debt? Looking for the best–and fastest–way to get out of the debt trap? This debt relief guide can help you reach your goals. Whether you decide to do it yourself or hire a professional. In this guide, you’ll learn simple, yet effective debt relief, DIY strategies. These are the same strategies top debt relief professionals use. And the best part is, you won’t pay a dime to third party professionals. But what if you don’t have the time? That’s when a debt relief professional can help. You’ll also discover how–and when–to hire a professional to help. Here’s how you do it yourself.
- Do-It-Yourself Debt Relief
- Debt Relief Programs
Do-It-Yourself Debt Relief
Before we dive into debt relief programs, we’ll discuss how you can get out of debt on your own. You’ll save a ton of money–and learn to how to become more effective in managing your finances. It’s a win-win. The key is to be patient. This isn’t an overnight process. Here’s how it works…
Step 1: Review Your Credit Report and History
The first step is to see where you financially stand. Do you have late payment history? Too many credit inquiries? Possible errors on your credit report? In most cases, your credit utilization is too high. You’ll need to use the debt snowball or debt avalanche method to bring your utilization down. But we’ll get to that in a minute.
If you don’t know how or where to get your free credit report, here are a few options:
Option #1: Review your credit report, for free, at AnnualCreditReport.com
Option #2: Use a free app like Credit Karma.
Option #3: If you have a credit card with any major provider, they have their own web apps that can give you access. (Capital One, American Express, Chase, etc)
Step 2: Dispute Errors on Your Credit Report
If you have errors on your credit report, you’ll want to dispute those ASAP. If you do find errors, submitting a dispute can raise your score.
Step 3: Create a Budget (and Stick to It)
Here’s where most consumers fail: they spend more money than they bring in. We get it.
It’s easy to do.
Here are 5 budgeting templates you can use to track your finances:
Step 4: The Debt Snowball / The Debt Avalanche
Let me break this down for you…
The Debt Snowball Method
Made famous by financial expert, Dave Ramsey. Here’s how the debt snowball method works. You create a spreadsheet of your total debt owed, including the amount owed per creditor. Then, you begin paying off the debt with the smallest balances first. Once you pay off this debt, you can take that payment and apply it to the next one. Hence the term, “snowball”. Keep reading, because it gets better…
The Debt Avalanche Method
This method is like the debt snowball method, but with a twist. Instead of paying your lowest balances off first… Do you see how powerful this is? You’ll pay off the debts with the highest interest rates first. This will save you a ton of money in interest charges…and…help you pay the principal off much faster.
Step 5: Loan and Credit Card Tips
Get a Secured Credit Card – Let me clarify…only if you have bad credit. With a secured credit card, you can rebuild your credit. You’ll have to make a small deposit. But, pay the balance off every month and you’ll build positive credit history in no time.
Stop Applying for Credit. Credit inquiries are only a small fraction of a credit bureau scoring algorithm. But it can still impact your credit score in a negative way. “Soft” credit inquiries should be fine and don’t impact your score.
Step 6: Monitor Your Credit Report
Once you take the steps above, you should track your credit report and score. You can do this by using any free or paid credit monitoring service. Also, paid versions have more frequent updates and are more accurate, in our opinion. Are you starting to see how this works? I know what you’re thinking… “I don’t have time to do all of this!” And that, is where a professional can help.
Debt Relief Programs
If all that sounds like a lot of work, it’s because it is. Are you a busy person? Do you find it difficult to stick to a schedule? Then a debt relief professional may be your best option. Here’s a list of solutions you can research:
Debt Consolidation Loan
A debt consolidation loan works like this: a lender gives you a loan to pay off all debt. Then, you’ll have one monthly payment from one lender. They key here is to pay this loan off quick. Tip: before you pay your creditors, do this. Call each one and negotiate a payoff that won’t affect your credit history.
Here’s how a debt settlement works. Debt settlement companies contact your creditors and negotiate payoff or interest rate reductions. Once they do this, they pay all your debt off. This leaves you with one monthly payment. Companies get paid based on how much they save you in payoffs and interest fees.
Debt Management Plan (DSP)
A debt management plan is like debt settlement, only you work with a credit counselor. This person helps you budget, analyze your finances and gets you on the right track.
Credit counseling is the best way to go in our opinion. But only if you make sure to use a free on-profit credit counseling organization. You’ll have access to a financial expert that helps you budget and suggests ways to cut expenses. Most credit counseling companies also offer a debt management plan. It means you’ll get a loan to pay off all your debts, minus your single monthly payment to the lender for your loan. But how do you know which is right for you?
Here’s the bottom line… either way works. You simply need to choose one and stick with it. Here’s why that’s important… Many people “think” they can stick with a debt payoff plan…but after 3 months, they fall right back into the same habits. It all boils down to this: stick with the plan and you will reap the rewards. Do you have any debt relief suggestions we can add to this guide? Let us know in the comments!