It takes effort and dedication to get out of debt, but with the right tools it is possible to do. The first step is to all look over the credit reports and score. Dispute errors on the reports and then decide which debts will be able to be paid at the present time. Also keep in mind that there is a statute of limitations on debts older than seven years so families who have old debts should take advantage of this and not worry about those debts.
Create a budget for debt elimination
One of the best methods of debt reduction is to create a workable budget that allows for allocation of funds to pay down debts. If someone has a budget of $5000 each month and he earns $75,000 annually, he should use part of his income in the budget to get rid of debts. This would mean that he needs to trim unnecessary expenses from his budget.
Sell what you don't need
Another way to eliminate debt is to sell items in the home that are not needed or outdated. For example, if the family has bags of baby clothes that the baby never got to wear, the family can bring the clothes to a consignment store and sell them for profit. The money earned would be used to pay off debts.
Consider a second income
For those who want to pay off debts quickly, it would be a good idea to have a second income. Some ideas include babysitting, working in fast food or retail, doing online jobs weekly, creating a home-based business in tutoring or data entry, housecleaning or selling handmade crafts online. A person can take the earnings from the second job and create a savings account just for getting rid of debt.
Automate bill payments
The benefit of having this system in place is that families will no longer have to remember the various due dates of bills. This also gives them the chance to build a solid payment history that will help them when applying for new credit.
Borrow from relatives
This is a good choice for someone who only has a few hundred dollars left to pay off before he becomes debt free. He needs to be honest with his relatives about his financial situation and the length of time it will take to repay the money. The agreement should also be in writing.
Get credit counseling
Credit counseling is a service where those in debt receive lessons on the best strategies of getting and staying out of debt. A credit counselor might also contact creditors on debtors' behalf to negotiate for lower monthly payments or interest rates. Research each counseling agency carefully before choosing one as some agencies are unethical.
Don't apply for new credit right away
After a person becomes debt free, it is not the best idea to apply for new credit right away. Use this time to enjoy financial freedom and become more literate about money. With these steps, a person can become debt free long term.