Mortgage Dictionary -> Debt
The average American now carries $8,000 in credit card debt at any one time, in addition to tens of thousands of dollars in other debt like student loans and mortgages. If you're in debt, you may be thinking a lot about how you'll get out of it. While getting out of debt is no easy task, once you understand a bit more about what debt is and know how to get out of it, you'll find this task a lot easier.
What is Debt?
Debt is the amount of money owed to a lender. It is the legal obligation of the borrower to pay this amount back in full, as well as any interest that applies to the balance. Debt can come in the form of credit card debt, mortgage debt, car/truck debt etc.
Four Ways to Get Out of Debt
Getting out of debt is possible regardless of how much debt you carry. Follow the tips below to help you get out of debt.
1. Cut Up the Cards. The first step toward getting out of debt is to stop using your credit cards. Since it has probably become an ingrained habit for you, you'll probably need to cut up the cards or put them away elsewhere but make sure to take them out of your wallet regardless.
2. Negotiate Your Interest Rates. Most credit cards carry high interest rates of 20% or more, so you're probably paying quite a bit in interest charges alone rather than paying down the debt. Fortunately, many credit card companies will lower the interest rate if asked. Call each of your lenders and ask them to do this for you.
3. Pay At Least Double the Minimum. If you were to pay just the minimum on a $3,000 debt, it could take you many years to pay it off. You can pay it off much quicker by simply paying more than the minimum. Aim for paying double the minimum on each of your cards and you will get out of debt quicker.
4. Credit Counseling. If you have over $10,000 in debt, you may find yourself overwhelmed in figuring out how to pay it back. In this case, you'll want to consider going to a non-profit credit counselor in your area who will help you to set up a debt reduction and debt consolidation plan to get out of debt. Debt consolidation will bundle up all your bills in one monthly payment with lower interest rate.