Become Debt Free

Becoming debt free, for most Americans, is a dream that they are far off from realizing. 80 percent of Americans are in debt at least $8,000. If this debt is credit card related, add on top of that balance another $1,400 in interest payments per year, assuming interest is at 18 percent. Debt does take a long time to pay off, especially if you start falling behind in your payments, and interest and late fees start to pile up on to of your balance.

There are many methods to become debt free, so easier than others. Every person’s debt situation is unique, and there are routes that you can take to become debt free, that can be catered to your particular situation. From money management, all the way to bankruptcy, there is always something you can do to improve your situation.

How to Become Debt Free

Debt is a burden on all people, especially if you don’t have full control of your finances. Being behind in the slightest bit can seem like the end of the world, and it can seem like the way out is too far away to reach. There are numerous fashions to becoming debt free, and using the one that is particular to your debt situation is the first step in the right direction.

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Bankruptcy is the one single option that everyone associated with being in debt, and easy way out. On the contrary, bankruptcy is a harsh, difficult way out of debt, and can leave a permanent stain on your overall credit. Bankruptcy does eliminate most debts, with the exception of federal student debts, or tax debts to name a few. However, in some cases, declaring bankruptcy will mean a lot of your assets will be liquidated to pay off your debts to your creditors. This process can also only be filed once every six years. Bankruptcy should only be considered as an option to become debt free when all other avenues have been tried, and failed. It will stay on your credit report for up to ten years, making it very difficult to receive credit, in any at all.

If you are in severe financial trouble, but not ready to declare bankruptcy, there is another option, debt negotiation. Debt negotiation, or debt settlement is the final step before bankruptcy. Negotiation requires debtors to be behind in their payments by a few months for the process to be successful. Debt settlement professionals negotiate with creditors whom you hold a balance with, to lower your overall debt. By being so close to bankruptcy creditors are afraid they may not receive any payment whatsoever, and in return, agree to lower the overall balance to receive payment. Because you need to be behind in payments, debt negotiation does affect your credit score. Debt will post on your credit report as settled, rather than delinquent, which is probably the best you could do in this situation.

If debt is just becoming too much, and you find yourself struggling to get by each month, debt consolidation is a solid option to become debt free. Consolidation takes all outstanding, unsecured (no collateral) loans, and combines them into one single loan with a lower interest rate. The advantage to consolidation is, first, having only one single monthly payment to cover all your debts is a simpler that making four different payments to four different creditors. Consolidation loans usually have a much lower interest rate that credit card interest, and allows you to make a dent in the principle balance faster than if you were having to pay through a higher interest rate.

Becoming debt free can be a difficult process, and hardly ever happens quickly. As shown there are numerous option, depending on your particular financial situation, to reach your goals of being debt free. Options as simple as transferring credit card balances to the lowest interest rate card, to the other extreme, bankruptcy. There is nothing to be ashamed about in regards to being in debt. Millions of Americans are. With proper information, and education, being debt free is a reachable goal.

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