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Ways to Eliminate Debt
American Middle Class

5 Ways to Eliminate Debt

The estimated reading time for this post is 159 seconds

U. S. consumers’ debt has increased nearly $2.3 trillion since the height of the Great Recession in 2009-growing across almost all debt products to top $14 trillion, according to a recent study by Experian.”]1] Many Americans carry at least $30,000 or more in personal debt, including student loans. For many Americans, their debt is ever-growing since the recent economic crisis.  Debt is frequently caused by spending more than you earn or failing to pay debt on-time or in full. Debt can be stressful and create a financial shortfall. Some debt is reported to one or all three of the major credit bureaus, which can lower your create score and increase the amount of paid interest rates. Keep reading more details below to learn how to eliminate debt effectively.

5 Ways to Eliminate Debt

  1. Consult a Debt-Relief Specialist

There is no overnight solution for debt. Many people feel alone and seek expert debt resolution. For a fee, a debt specialist will analyze your debt and negotiate a settlement with your creditors. The settlement will usually offer lower payment arrangements. If you sign up for a debt relief program, make sure you’re dealing with a reputable company, discuss the fees upfront, and settle the fees in writing. Some debt-relief programs offer credit counseling to help clients minimize future debt.

  1. Prioritize Your Debt

Many people suffer from more than one form of debt and find themselves overwhelmed, trying to pay them all at once. “Make a substantially larger payment to one credit each month until the debt is paid.”[2] Prioritizing debt can help reduce debt quicker and encourage a commitment to eliminating other debt.

  1. Create a Supplemental Income

Debt can linger without the funds to pay. The following are great ways to earn an extra income to help eliminate debt:

  • start an e-commerce business
  • monetize a hobby
  • start an interest-bearing savings account
  • start an emergency fund
  • gig work (i.e., Lyft, Uber, Door Dash)

In a case of extreme debt, consider borrowing from your retirement savings (beware of penalties) or life insurance policy. Try to avoid taking out a personal loan or 0% transfer fee credit cards to avoid additional debt.

  1. Create a Budget

Creating a budget is one of the most important ways to eliminate debt, but many people fail to utilize it. List only necessities on your budget and refuse to spend on impulsive purchases. A budget is also a great way to accumulate extra money to use on debt.

  1. Negotiate a Settlement

Some creditors are willing to negotiate the amount of debt owed. Ask the current creditor if they will accept a “lump sum” payment on your debt. Depending on some debt, a debt settlement can be a great option. Debt settlement is a great way to resolve business debt, but harder for the more massive personal debt. It’s essential to understand how to negotiate with a creditor to reach a settlement and eliminate debt successfully.

You can eliminate debt by utilizing a few or all of the tips listed above. Debt didn’t occur overnight and isn’t resolved overnight. Be patient with your debt-relief strategies, and stay committed to eliminating debt over a reasonable time best suited by your financial situation.

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