How do you get rid of debt?


Quick Answer

To eliminate debt, create a plan for repayment of the amounts owed, and pay accounts off according to the plan. Consulting a credit counselor or consolidating debt are also options available for debtors.

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Full Answer

Before establishing a budget, determine the exact amounts owed, and stop using credit cards for nonemergency purchases. Determine which debts are most important and which accounts have the highest interest rates. Pay those debts off first by creating a budget that reduces spending for unnecessary items in order to pay more toward credit accounts. When attempting to pay debts off, always pay more than the minimum amount due, particularly when the account accrues interest monthly, and always make payments on time to avoid additional fees.

In some cases, taking out a loan is an efficient way to consolidate debt into a single monthly payment. For instance, a home equity loan may cost less to repay if the interest rates for the loan are less than the interest rates on other debts. A loan also offers the benefit of combining all debts into one payment each month. Homeowners should only take out a loan if the repayment of the loan offers savings when compared to their current monthly payments.

Working with a credit counselor is an option when debt becomes unmanageable. Credit counselors can help establish a budget for the household. Credit counselors also provide information on consolidation. Typically, nonprofit credit counseling organizations provide services free of charge.

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