% Balance Transfer Credit Card
It might seem counterintuitive to apply for a credit card when your main goal is to get out of credit card debt, but 0% balance transfer cards can help save you money in the long run. Find a card that offers a long 0% introductory period preferably 15 to 18 months and transfer all of your outstanding credit card debt to that one account. You’ll have one simple payment each month, and you wont pay interest.
Federal Student Loan Deferment
Deferment allows you to temporarily stop the monthly payments on federal student loans without facing penalties. This will keep your loans out of default as you work to secure another job. If you have unsubsidized student loans, interest charges will continue to accrue during deferment, so your balances will be higher when you get back to making payments. However, if you have subsidized student loans, the government will pay those interest charges for you.
Start Small And Snowball Your Payments
Now you’ve got your bills prioritised and your debt money sorted, you’re ready to get rolling on your repayments.
The quickest and most motivating way to get out of debt is the snowball method. You start small, and pay off your debts one by one. This is great for paying off credit card or personal loan debt.
Here’s how it works:
- List your debts in order from smallest to largest.
- Pay the minimum using your debt money, pay the minimum amount due on all debts each month.
- Pay off the smallest debt first use the rest of your debt money to pay off the smallest debt. Pay as much as you can each month, until you clear it.
- Celebrate and repeat when you’ve paid off that debt, reward yourself by doing something you enjoy. This will inspire you to keep going. Then move onto paying off the next smallest debt, and so on
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Use Savings To Pay Down Larger Debts
Don’t be afraid to use a portion of your savings to pay down high-interest rate debts. Using cash reserves for debt repayment is a smart decision because you will stop accruing interest on those large balances. Although it may feel comforting to have some extra cash sitting in your bank account, the truth is that those funds aren’t really working for you not with today’s record low interest rates. Don’t deplete your savings entirely. If you’re sitting on a pile of cash, do use some of those funds to eliminate your bills.
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Mistake : Not Setting Aside Emergency Savings
About 56% of Americans didnt have $1,000 in savings to pay for an emergency in January of 2022, according to a Bankrate study. Are you ready if your car breaks down or your roof springs a leak or your dog bites the neighbor and you need a lawyer?
Remedy: Get prepared. You need 3-6 months of expenses in an emergency fund. It may take a while but make that part of your budget. Put 5% of your income toward covering lifes unexpected problems. If nothing else, youll probably sleep a lot better.
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Mistake : Not Creating A Practical Budget
At the risk of overstating things, getting out of debt is like going to war. If you try to wing it, youll probably end up waving the white flag.
Remedy: Come up with a realistic battle plan. It will address necessities like housing, food, transportation, health care, insurance and education. It will also create room for you to pay down your debt.
A good place to start is by getting rid of your credit cards. Well pause now to let Visa addicts finish their seizures. Youll think twice if you have to pay cash for things like dining out, movies, leather boots and electronic gizmos.
Consider Consumer Credit Counseling
A can work with you to review your finances and figure out a budget that can include monthly debt payments. If you cant afford your debt payments, the will try to work out a debt management plan with your creditors. The DMP will often include lower monthly payments to your creditors, and you might make one monthly payment to your credit counselor who will then distribute payments to each of your creditors.
If your situation and ability to pay off debts is more complicated, you could consider seeking assistance from a debt relief program. Pursuing debt settlement is a last resort because it involves stopping payments and working with a firm that holds that money in escrow while negotiating with your creditors to reach a settlement, which can take up to four years. Withholding payments from your creditors can seriously damage your credit score.
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Lie: You Need To Keep Up Appearances
The neighbors down the street just redid their kitchen, so now you think yours needs an upgrade too. Your old friend from high school just posted a picture of her new BMW on Facebook, so now you think you need a flashy new car. We hate to break it to you, but its a big ol nope on both of those things.
This comparison game is known as the dreaded keeping up with the Joneses mindset. Everything on the outside might look shiny, but little do you know, the Joneses have a leased BMW and they took out a huge loan to renovate that kitchen.
The point is, the Joneses might look like they have it all together, but in reality, theyre usually broke. And if youre not careful, youll follow them right into bankruptcy by trying to keep up with their every move. If you want to stop being in debt, then dont let people who are in debt be your role models.
Some Debts May Not Show Up On Your Credit Report
Most major lenders report account activity to the credit bureaus, but they’re not required to. Therefore, a creditor may not share your account information with the credit bureaus.
Old debts may not be included on your credit report, depending on how old they are. Even if they originally appear on your credit reports, accounts closed in good standing are removed from your reports after 10 years. Accounts closed as a result of late payments are removed after seven.
There are also exceptions to the types of debt you might expect to find on your report. Medical debt, for instance, is generally not listed on credit reports unless it becomes severely past due and is reported as a collection account. Retailer payment plans aren’t commonly reported to the credit bureaus, either.
In some cases, the account will only appear on your credit report if the creditor turns your account over to a debt collection agency. Typically, the original creditor will be listed along with the collection account.
If you don’t see a debt on your credit report, you also can search through old bills or contact creditors to nail down all the debts you owe.
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Call Your Mortgage Lender Immediately
If you are a homeowner, then the biggest concern you need to have during a period of unemployment is keeping your mortgage current. If you default on a credit card, the worst thing that will happen is that they can take you to civil court. However, if you default on your mortgage, the lender can start foreclosure actions and you could lose your home.
The good news is that mortgage lenders generally want to avoid the expense and potential losses they face when a homeowner forecloses. So, theyre usually very willing to work with you, so you can avoid default. This is especially true if you contact them early before you start to miss payments.
Its fairly common for mortgage lenders to grant forbearance to homeowners. This means they will temporarily reduce or stop your monthly payments altogether while you work to get back on your feet. This will take the stress of losing your home off your shoulders and give you one less bill to worry about.
Lie: You Need A Credit Card For Emergencies
Getting out of debt is amazing. But if you keep that ol credit card around for emergencies, youll find that everything starts to become an emergency.
Car trouble? Emergency.
Out of groceries? Emergency.
Christmas toys? Emergency!
. . . and the next thing you know, youre back under a mountain of credit card debt.
Look, emergencies happen . But thats why you need an emergency fund. Let a fat stash of cash be your safety netnot some overhyped piece of plastic that charges you fees just for having it around.
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Cut Back On The Extras
Now that every dollar has been given a job to do, its time to see where you can cut back.
Take inventory of any automatic payments that might be draining your bank account. Maybe you have a $7 subscription to the Clean Beard Club. Were not knocking beards , but these kinds of expenses add up quickly. Plus, that free gift they offered you when you signed up is probably long gone, leaving you with a subscription you keep forgetting to cancel every single monthand more beard oil than you know what to do with.
Dont get us wrong. We love a good mail day as much as the next person. But if youre drowning in student loan debt, credit card debt or just-plain-debt debt, youve got to make some pretty big changes. You guessed it. Were talking about cutting back on nonessential items and getting your want-itis under control. Here are some tips:
- Make coffee at home .
- Cut back on your grocery bill by clipping coupons and going without the kids so youre not tempted to overspend on Oreos .
- Dont even step foot in a restaurant .
- Sell everything thats not nailed down .
Find Ways To Make Extra Cash While You Look For Full
From freelance work to side gigs, there are plenty of potential options that you can use to supplement your income while you look for full-time employment. You may feel like these are just temporary stop-gap measures, and they are. You just need at least some form of income to cover your bills and necessities until you can get another full-time position.
Consider these options:
- Pick up freelance work through services like LinkedIn Pro Finder, particularly if you are a creative professional, such as a graphic designer.
- Find side gigs, such as becoming an Uber driver or being a delivery driver for Uber Eats.
- See if you have items that you can sell for cash, such as old clothing or electronic devices.
- Get a part-time job at a local retailer or in hospitality, so you can earn income in your off time when youre not looking for employment.
Looking for full-time employment in your chosen career field should certainly be your primary focus. However, you cant ignore opportunities to keep your finances afloat while you find that next opportunity.
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You Are Trying To Keep Up With The Spending Of Others
You might be in debt because you want the latest and greatest things, and you want to buy the things that you have seen others have. However, if everyone is spending money and going into debt to keep up with others, then its just a never-ending circle. An example would be keeping cable even though you know you cant afford it.
Help When You’re In Debt
- There are several free services that can help you if youre struggling with debt.
- Laws are in place to protect you from being treated unfairly by debt collectors.
What the ACCC does
- We help consumers and businesses understand their rights and responsibilities.
- We investigate businesses where they might be breaking the law.
What the ACCC can’t do
- We dont provide financial advice or counselling.
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Using A Dispute Resolution Scheme
Many industries have their own ombudsmen dispute resolution schemes. Industries include:
If you complain directly to a business about a debt, but it doesnt resolve your issue, then a dispute resolution scheme may be able to help you.
Legal proceedings against you usually cant be started while a matter is with an ombudsman.
The Australian Financial Complaints Authority is the dispute resolution scheme for financial complaints. You can contact AFCA if you are having a problem with debts relating to credit, finance or loans.
You can contact the Telecommunications Industry Ombudsman if you have a complaint about a phone or internet debt.
You can contact energy ombudsman schemes if you have a complaint about an energy debt. They are different in each state and territorythe Australian Energy Regulator has a list.
Take Responsibility For Your Debt
I had lots of reasons why I charged these expenses on credit cards. And at the time, all of my expenses were justified. Some were even emergencies. But, the fact remained that I was the one who got into the situation. And I would need to be the one to get myself out of the situation. No one was standing in line to save me. It was up to me.
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Getting Advice On Consolidating Debt
Be cautious of debt consolidators who charge fees or get commission for their services. You can often get the same help for free.
ASIC’s MoneySmart website provides information about managing debt. This includes how to:
- check your credit report to confirm the information is correct and fix any mistakes
- get help with a repayment plan if youre struggling
- find free financial counselling services in your state or territory
- find free legal advice services in your state or territory.
Mistake : Not Verifying Your Credit Report Is Correct
About 34% of Americans found at least one error on their credit reports, according to a 2021 study by Consumer Reports. You could end up paying for somebody elses mistake if you dont report a credit dispute.
Remedy: Check your credit reports. The three major credit reporting bureaus Equifax, Experian and TransUnion allow you one free credit report a year. Look for incorrect delinquencies and/or balances that hurt your credit score and make it harder to get a loan.
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Is It Better To Pay Off Debt Or Invest Your Money
Yet, if youre willing to do the work, debt stress relief is possible even if your debt lingers. Getting to safety isn’t as simple as running away from a hungry predator, says Amanda Clayman, financial therapist and Prudential’s Financial Wellness Advocate. Getting out of debt takes time, and sustained effort, so we will likely have to tolerate the stress for a while. In a sense, debt stress is more noise than signal, so we have to learn ways to manage it in order to not suffer additional adverse effects.
Why Digging Out Is Worth It
Being deep in debt can be stressful to your health. The worry over how to pay the bills and the struggle to save for the future impacts over 50% of Americans, according to a 2020 study by Capital One. And stress over finances can make it more difficult to save, budget, or even write a shopping list to help keep you on track at the store.
Digging yourself out of debt can boost your mental and physical health. Having more income freed up from debt may mean greater financial confidence, morale, and better opportunities to save for the future.
Financial experts often recommend two ways to tackle debt. The “avalanche” method and the “snowball” method. Both plans may help you focus your approach to paying down debt. An avalanche approach means you pay off your loans or credit cards with the highest interest rates first. You throw as much money as you can at them, and pay only the minimum on all your other loans. The snowball approach has you tackle the lowest amount of debt first, pay it off, and then tackle the next loan.
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How To Stop Bailiffs
In most cases people are not being pursued by bailiffs but areactually under pressure from debt collectors.
Debt collectors are often referred to as bailiffs as they can behave in anaggressive manner and be difficult to deal with. In fact sometimes debtcollectors even claim to be bailiffs and argue they have the power to take yourgoods.
In actual fact, debt collectors have no right to do this and, as you havenot been to court and are not a criminal, have very limited powers.
When you are being pursued by a debt collector it is important to know yourrights.
They are not allowed to make your life a misery and cannot demand moneyyou havent got.
It is important to remember that debt collectors are regulated by the Officeof Fair Trading and by reporting them they could end up under investigation.There are also other laws thatcan be used to protect you from debt collectors.
Despite this, the best way to stop bailiffs and debt collectors is to makean arrangement with them as soon as possible.
At Debt Trust UK we can do thison your behalf and by appointing us as your representative we can deal with thesituation for you.
We can make sure that your interests are protected and that you are notbeing bullied. Normally we are able to agree an affordable repayment plan andin some cases we can even write off much of your debt. This can be done througha full and final settlement or Individual Voluntary Arrangement .