Help on Getting Out of Debt

If you carry thousands of dollars in credit card debt, you may have a hard time imagining yourself debt-free. Although debt can linger for many years and impact your credit, it doesn't have to be a lifelong sentence. Debt elimination is possible, as long as you know what steps to take.

Time Frame

• Debt likely accumulated over a course of several months or years. Likewise, don't expect immediate results when trying to get out of debt--unless you have enough money in savings to swipe out your debt. Planning and setting a goal is key to getting rid of your debt. Let's say you have an additional $200 each month after paying bills. This money can get rid of a $2,000 debt in about ten months.

Significance

• There are clear advantages to getting rid of your debt. The amount you owe has a tremendous impact on your credit score, and lenders take your debts into account when reviewing your application for financing. The lower your debt load, the higher your credit score, and the better your chances of getting approved.

Considerations

• Creditors ask that you make your minimum payment each month, and sending in this payment by the due date helps your credit score. Unfortunately, minimum payments do not quickly eradicate debt. Rather, debt can drag on for years and continue to accumulate interest. Tackling debt will require spending more money and making higher payments each month. Forward whatever you can afford, and make even higher payments as your income increases.

Prevention/Solution

• Making a huge payment to pay down your credit card debt, and then charging additional items, is haphazard. Using less credit and more cash is key to overcoming the debt trap and quickly paying off your balances. Taking charge of credit card usage may require extreme measures, such as physically damaging your cards.

Benefits

• Being a homeowner creates additional opportunities to get out of debt--or at least eliminate unsecured debt. Home equity loans or lines of credit let eligible property owners take money from their equity and use this money to pay off high-interest credit card debt. Home equity loans commonly come with low interest rates and monthly payments, which saves borrowers money each month; and with fixed terms, you can pay off a home equity loan within a few years.