How To Become Debt Free

Debt avalanche: Pay off your highest-interest debt first

The debt avalanche method involves paying off your debt with the highest interest rate first, then working your way down from there. For example, you might consider paying off debt in this order:

* 25% APR store credit card

* 22% APR rewards credit card

* 7% APR auto loan

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* 6% APR student loan

* 5% APR mortgage

Debt snowball: Pay off your smallest balance first

Tackle your debt in baby steps using the debt snowball method. You’ll target your debt with the lowest balance first, while making the minimum payment on your other debts. Once your low-balance debt is repaid, you’ll move onto the next lowest debt.

Build a budget to pay off debt

It’s easy to lose control of debt when you’re not tracking your spending. Budgeting is a big part of staying out of debt, but it can also help you pay off debt faster.

Dedicate unexpected windfalls to your debt

When you receive an unanticipated sum of money, it’s easy to imagine fun ways to spend it: Take a vacation or buy that latest smartphone model you’ve been wanting. But if you’re in a lot of debt, it may be wiser to use your windfall to pay down debt.

Meet with a credit counselor to form a repayment plan

Nonprofit credit counseling organizations offer low-cost or free debt counseling. A certified credit counselor will:

* Offer money and debt advice

* Help you create a budget

* Give you educational materials on money management

Negotiate debt settlement with your creditors

When unsecured debt becomes too much to handle and you’re delinquent on payments, you may consider negotiating debt settlement with your creditors or a debt collector. Your creditor, like your credit card company, may agree to set you up on a payment plan, reduce your monthly payments or settle your debt for less than what’s owed.

Consider bankruptcy (as a last resort)

Should you find yourself overwhelmed by your finances, you may be able to discharge your debts by filing for bankruptcy.

By Amanda Push, Erika Giovanetti

Culled From: https://www.lendingtree.com/debt-consolidation/how-to-get-out-of-debt/