6 Tips for Getting Out of Debt Quickly
The average debt in America is $137,063, despite the median household income being only $61,372.
No one wants to live in debt. Sometimes it’s just a mismatch between income and expenses — there’s little you can do. Other times, it’s a matter of reorganizing your finances and your priorities. Getting out of debt is never easy. But there are ways that you can do it quickly, especially if you have other goals in mind.
1. Arrange a Settlement With Your Creditors
Sometimes, you can ask your creditors to settle with you. Tell them you can’t pay off the full amount, but you do want to pay off some amount. They’ll give you an amount that might be as low as 50 percent of what you owe.
The catch, of course, is that you need to pay it all at once. If you’re able to sell a large asset, like your car or your home, you may be able to settle your debt for much less than you really owe.
2. Consolidate Your Debts Into a Single Loan
While this doesn’t eliminate your debt, it does mean that you can pay off your debt much faster. You might have a credit line at 20% APY that you could get under a 5% APY consolidated loan. You’ll be able to pay off the debt for less, with a lower monthly payment.
Debt consolidation does require that you still have fairly reasonable credit, because otherwise you won’t qualify for the loan. But if you can get it, it’s certainly better than chipping away at high-APY debt.
3. Sell Your Home and Pay Off Your Debt
Are you currently under water because of your mortgage? It could be that you need to change your living situation for a time. Selling your home to pay off your debt is one of the fastest, easiest ways you can get out of debt.
Whatever you do, you want to avoid going into foreclosure. If you go into foreclosure, any equity you do have will be eaten up with legal fees and charges, and you may find yourself unable to purchase another home for quite a few years.
4. Get a Second Job
If you’re already working 40 hours per week, taking on a second job can seem intimidating. But it may only be for a short amount of time. Many people today have a side hustle that they use to pay off their debts, or just for extra spending money. Consider how much you’d need to make extra a month to make your debt payments.
5. Take a Loan Against Your 401k
If you have a hefty 401(k), you may be able to take a loan out against it to pay off your existing debts. You’ll no longer be in debt to your creditors, just in debt to yourself. Don’t cash out your 401(k) plan while doing this; just make an arrangement with your 401(k) provider.
You never want to cash out your 401(k) early because then you need to pay taxes on the money that you withdrew as if it was income. A 401(k) (and other retirement account) is also protected during bankruptcy, which is important.
6. Declare Bankruptcy
Sometimes the best answer is the most direct answer. You can declare bankruptcy to get out of debt, provided that your debt isn’t in the form of student loans. But that does mean that the consequences of your debt will follow you — you may not be able to get loans or credit accounts for up to seven years thereafter.
Unfortunately, there are some situations in which bankruptcy might not help you. For instance, if you can’t presently afford payments on your home, it’s better to just sell your property rather than try to declare bankruptcy to keep it.
If you want to make a change and get your financial situation setup right, selling your home can be an excellent first step. At We Buy Salt Lake City Houses, you can get a cash offer for your home today. Contact us now to find out how much we can give you.