How to Get out of Debt?

Claire Emma  2019-09-12 18:07:36

Wealth helps us feel secure, and on the other hand, anyone prefers to be out of debt as soon as possible. However, the main idea is to create a budget and spend far less money than you make.

  1. 1Get a copy of your credit report. If you live in the United States, you are entitled to one free credit report per year. However, if you are trying to get out of debt, you want a copy of your credit report from all three major reporting bureaus, so you can compare them. You should review your credit reports and contact the credit bureau that issued the report if you find any errors, so they can be corrected.
    • 2Make a list of all your debts. Going off of your credit reports, you can create a spreadsheet or list of all the debts you have. Include the name of the lender, the type of debt it is, the minimum monthly payment, and the interest rate. As you're going through your debts, if you see anything small that you know you can take care of immediately, go ahead and do so. What you should be left with on your list are any debts that will take several months to pay off.
      • 3Pay off high-interest debt first. Take your list of debts and organize it so that the highest interest rate is first. The higher the interest rate you're paying, the more money you're losing on that debt. This may seem counter-intuitive at first, especially if you have a larger debt at a lower interest rate. However, it's important to get the higher-interest debts out of the way so that you aren't continuing to pay that interest. If you have a lot of debts, see what you can do to chip away at all of them, while still focusing on paying off those with the highest interest rates.
        • 4Negotiate lower interest rates. If you're in good standing with your lenders, you may be able to get them to lower your interest rate. It also may be possible to refinance some loans with another lender so you can get a lower interest rate. Keep in mind most consumer credit card companies are reluctant to lower your interest rate. For this reason, it's generally best to pay the balance on any consumer credit cards in full every month, rather than carrying a balance from month to month.
          • 5Set aside savings for emergencies. Often, credit card debt is accumulated because of an unexpected emergency. If you build a savings account with three to six months' worth of living expenses, you will protect yourself against future credit card debt.