Debt seems to be a problem for many people. Although they may think they are the only ones, there are many people who struggle with debt, and all for similar reasons.
People are in debt. There is nothing new about that, but the truth of the matter is you don’t have to stay in debt. There are ways to get out from underneath indebtedness, but it does require you to be truly concerned about your financial condition.
Why People Are in Debt
There are many reasons people are in debt, but they really don’t need to be. Most of the causes of indebtedness are things that you can control — if you want to. You can change your financial condition if you are willing to change your personal life style. Here are some of the more common problems that most people have with debt.
- People don’t know how. Many people are so far in debt that they don’t see how to get rid of debt.
- People are addicted to buying things. This may sound odd, but many Americans feel such a need to have ‘things’ that they shop without considering the consequences.
- People are unwilling to sacrifice. Getting out of debt often requires making a sacrifice. Giving up cable television or dinner each Saturday night is too much for some people.
- People want to keep up appearances. Even though they are struggling to survive, many people use credit so that it looks like they have more than they do.
- People don’t want to. Sometimes it just seems easier to stay in debt and struggle than to do the work of getting out of debt.
Getting Out of Being Deep in Debt
Getting rid of debt is a challenge, but thousands of people do it each year. In order to succeed, you need to have determination and a willingness to achieve your goal of being debt free. There are essentially five ways to pay off debt — some are good choices and others are rather costly.
- Do-it-yourself debt reduction. This approach probably requires the most self-discipline, but if you’re determined to get out of debt, this is one way to meet your goals without relying on anyone else. It may require some drastic sacrifices, but it may be the least costly in the long run.
- Consolidation loans. This will require you finding a lender who will help you resolve your problem. Many banks are hesitant to provide this type of loan, as the people who are asking for one already show they have a problem paying off debt. If you can get a debt consolidation loan, be certain to not take on additional debt. If you’re using it to pay off credit cards, don’t go back and use the credit cards.
- Credit counseling. If you need some help to figure out how to deal with your expenses and how to get them paid off, a credit counseling firm may have the answers you need. These services won’t get you any more money, but they will certainly be able to help keep creditors from calling every day. By giving one payment to the counseling service and letting them make the payments, you are assured of getting your debts paid off.
- Debt settlement. Sometimes you can go to your creditor and ask them to agree to let you pay a lesser amount on your debt. Many creditors would rather get a portion of what you owe them instead of getting nothing. You may need to consult a lawyer concerning this approach, as certain types of debt forgiveness may also need to be included on your federal income tax return.
- Bankruptcy. If you are so far in debt that none of the other options will work, you may need to hire an attorney to help you file for bankruptcy. This will stay on your credit report for up to ten years, so be prepared to have a real battle with getting future credit. The first two years after filing bankruptcy are the hardest, as most lenders won’t even consider giving you a loan.
Get Your Credit Report
No matter which course of action you chose, one of the first things you need is to do a credit score check. You can request a copy of your credit report annually from each of the three credit bureaus (TransUnion, Equifax, and Experian). You’ll want to check your report at least once each year. You may also want to consider hiring a service to monitor your credit score for you. Either way, it is important to know how your efforts to get out of debt are affecting your credit score.
Getting out of debt is a real challenge, but if you stick with it, you’ll soon begin to see changes in your stress level, smaller bills, and an improvement in your credit score. Don’t give up. Staying in debt will only make your life more difficult.
Amy Johnson is an active blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances.