Getting out of debt is like losing weight.
You didn’t pack it on overnight, and you’re not going to lose it by tomorrow.
However, increasing your chances of success depend on not making big changes, but making little ones. Making big shiny promises and resolutions for the new year is almost guaranteed to fail. Those big changes are harder to maintain over the long then small changes and strategies for getting out of debt that will eventually bring you success. People get tired of not seeing immediate change when they go big. You can make big changes by taking smaller steps whether it is losing weight, denting your debt, or even making sweeping organizational changes. It takes longer to show results, but those results are sustainable and even beneficial over the long term. Let’s look at some big changes and little changes that can change your debt picture for the better by the time 2020 rolls around.
Consolidation is one of the big strategies for getting out of debt that can work in your favor if you have multiple balances at higher interest rates. Whether it is for credit card debt, taxes, or other issues a consolidation loan can trim off lots of interest and give you just one debt payment to handle each month. When you have a lot of debt, that affects your credit score. You’re not going to get the best APR on these loans, but there is nothing preventing you from making extra payments when you can. Banks may not be willing to handle these types of loans, but peer-to-peer lenders often do. It’s important to go with a reputable outfit when you are taking out one of these kinds of loans, so do your Internet homework!
Paying for your education should not mean paying for a lifetime. Whether you have public or private loans, consolidation of your loan balances can help you to manage payments over the long term. With consolidation (it’s really refinancing), you pay off the balances for your existing student loans and assume one lump sum of debt that you pay down over time. The federal government has a consolidation program for federally originated student loans, and various private offer them for privately originated loans.
You can also get a grip on those balances by using either deferment or forbearance programs that are available for student loans originated with the federal government. Both allow you to stop making your loan payments or reduce the amount you pay each month, but they have differences that you need to know. Depending on your type of loan, deferment may remove interest payments – which is desirable. That way interest is not building up while don’t pay or pay less. In the case of forbearance, that interest is going to pile up and is added to your loan principal.
One thing that leads to bad financial decisions is lack of financial literacy. This absence of knowledge about finances people at all ages and socioeconomic levels. Many people don’t know how to create a realistic budget, or what constitutes predatory lending or fraud. However, there are lots of great Internet resources such as Nerdwallet.com, Mint.com (now integrated with Intuit and TurboTax) for budgeting and bill paying, and also accredited financial counselors to help you get a grip on the basics and build a strong financial foundation.
There are three interrelated winter-themed strategies for getting out of debt and paying down balances that when taken as a whole can really show long-term results. These are the avalanche, snowball, and snowflake methods and while not as big and showy as the methods above, they are the ones that pay down the balances. Let’s break it down.
Don’t get discouraged by debt. Instead, resolve to slowly but steadily make it go away and to improve your finances and your life. Debt can be depressing, the source of anxiety, and even affect your relationships, so get back on a healthy footing over the course of 2019 and go into 2020 with a healthier bank account, credit rating, and peace of mind.
At Van Horn Law Group, we are practice built on helping people and treating them with compassion and dignity. Whether it is dealing with student loan debt, credit card debt, mortgage issues, or even bankruptcy, we are here to help you without judgment and with expert legal advice and experience. Our Fort Lauderdale and West Palm Beach offices are open seven days a week, so gather your paperwork and records and make a call. Your first consultation is absolutely free, and we will offer you our best legal advice on how to proceed on dealing with your debt.
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