Some Initial Facts

Americans are almost $700 billion in debt to credit cards and revolving debt loans. And 70% of them say their debt is becoming overwhelming, that is, almost too much to be able to pay. We have enjoyed living in a society in which plastic can buy anything we want right now, and everywhere we are encouraged to do so. Even our government is projecting a $400 billion dollar deficit for 2008, and no one is showing any panic. The difference is, the government does not have to make those monthly payments you do, and does not have creditors calling daily when those payments are not made. There is now an entire industry dedicated to helping people reduce and eliminate their debt, and expert advice is now available for the average consumer. You can achieve a position in which you never let debt loans dent your finances again.

What the Experts Say about Debt Elimination

The experts know that debt reduction and elimination take commitment and self-discipline. They will not tell you it is painless, but they will tell you that once you have achieved a debt-free lifestyle, you will enjoy a new type of freedom and security you haven’t known before. Being debt free, moreover, allows a consumer to pay cash for anything he/she wants as well as to save and invest for a financially secure future. You got into debt easily. Getting out will not be so easy, but get out you must. You are wasting thousands of dollars in interest on debt that could be going toward your long-term financial goals. The other important point made by the experts is that no situation is so bad that it cannot be remedied by some strategy.

Analyze Your Circumstances

The first step is to analyze your current situation. You will fall into one of the following general categories:

1. You are meeting your current monthly debt obligations, usually with minimum payments, but if emergencies and large expenses come up, you will need to charge those.
2. You are late on one or more payments to creditors, and you are stretching your budget as far as it can go.
3. You are terribly late on several payments and creditors and/or collection firms are calling daily
4. Your accounts have all been turned over for collection and you have no way to meet your obligations.

The Solutions

Solutions range from mild to drastic, but there is one for you. Consider the following expert advice:

1. Hunker down and eliminate all spending except the bare necessities. Place all excess cash on one debt at a time until it is paid off. Any windfall money, such as a tax refund must go toward debt payment. This can be a lengthy process and requires significant self-discipline and a willingness to cut up credit cards.
2. Secure an equity loan or a re-finance of a current mortgage in order to pull out enough cash to pay off the debt. These are great options if credit rating is still good. Again, commit to cutting up credit cards.
3. Look at consolidation, by securing one large loan with a lower monthly payment.
4. If a debtor is late on several payments, debt settlement may be the answer. Negotiations must occur with creditors to get the best possible compromise, in lowered interest rates, elimination of late and over-the-limit fees, and a total debt reduction. Debtors have done this on their own but it takes time and skills. Most people who opt for this employ the services of an attorney or other debt settlement professional.
5. Bankruptcy is certainly a final option, either a Chapter 13 or a Chapter 7, depending on individual state law and an attorney’s advice.

Options 3, 4, or 5 will require some leg work and research as well as a good knowledge of the law in the debtor’s state. In all instances, however, it will be necessary to eliminate the temptation of further debt by cutting up credit cards and closing loan accounts. Further, the debtor must understand the consequences relative to credit rating.

The important positive aspect of reducing and eliminating debt is that the consumer has the opportunity to get back on track and to get to a point at which savings and investment can occur. No one is really financially secure until there is the security of savings, and this has to be the ultimate goal.

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