If you find yourself in a financially tight situation then reducing debt on credit cards and loans can save you some extra money every month. There are ways to get the same debt relief without too many drastic changes to your lifestyle. You can get out of debt faster by making a series of small adjustments instead.
Reduce Spending to Pay Down Debt
- Refinance your mortgage, you can save hundreds of dollars every month by choosing a good mortgage plan if there is no early redemption penalty.
- Another option is to move into a more affordable property after selling your house; this is practical if your kids have moved out.
- Search online for great deals, you can find cheaper gas, insurance and electricity.
- Stop buying brands and buy generic groceries instead. You could also use coupons for your grocery.
- Reduce spending unnecessarily, especially on alcohol, smoking or eating out.
Making Extra Income and Paying Down Debt
- If you have items in your house that you no longer use then sell them online. Websites like eBay and other auction sites can get you good deals, you could also try a car boot sale for some extra cash.
- If you don't have the option to work overtime then try some other activities to help you earn extra like tutoring, freelance writing, pet sitting, dog walking and child minding. If you have any DIY skills then put it to use.
Use the Best Debt Free Solution to get Relief from Debt
There three options available for debtors to repay debts quickly. These options are debt management plan, debt settlement program and filing for bankruptcy.
Choosing any one of these debt solutions will you reduce your debt but it comes at a cost, you will be reported as defaulting on your credit agreement which could affect your credit score. The IRS consider debt cancellation as a source of income, a forgiven debt could be taxable.
Build a Debt Management Plan
Debt management plan doesn't mean debt forgiveness. The idea is to make a single substantial payment that will be distributed on pro rata basis to all your creditors, this eliminates the need to pay small amounts to many different creditors.
The creditor could stop charging any further fees and interest if they think it is necessary. Since the tax is not eliminated there wouldn't be any tax consequences.
Use a Debt Settlement Program
A debt settlement plan aims to reduce the amount owed to the creditors. It is one of the preferred alternatives to filing for bankruptcy; you can get up to a 50% reduction through some intermediaries. The reduced amount is easily repaid in a period of 12, 24 or 36 months.
This program will cost you 15% in management fees collected from the monthly payments you make. Taking the fees up front and then adding it to the total balance has been made illegal by the Federal Trade Commission (FTC).
Get Relief from Debt by Filing Chapter 7 Bankruptcy
Bankruptcy filing is the most effective debt even after the US bankruptcy laws were reformed in 2005. If you are ineligible for chapter 7 then chapter 13 is another option. All these measures ensure you reduce or eliminate debt completely.