When you’re drowning in debt it’s hard to imagine a way out, but in every situation there are options, some as simple as developing a good budget and as severe as filing for bankruptcy. But no matter how you look at it, there are options for reducing your debt. Here are a few basic steps for getting rid of debt.
Evaluate your types of debt and your options
Different types of debt can have more severe consequences. Not returning five bucks borrowed from your cousin probably won’t result in anything worse than an uncomfortable Thanksgiving, whereas not paying on a secured debt like your car payment can result in a repossession. Figure out how urgent your various debts are and prioritize the ones with the most severe penalties.
Create a budget
Creating a budget is vital. If you have any extra income, you can leverage that help you pay off some debts and begin chipping away at others. Make an outline of your income and expenses and figure out where you can cut or generate a little more. Figuring all that out, come up with a realistic amount you can use to pay off debts each month, putting the most urgent payments first.
Pay extra attention to secured loans
Some of the most dangerous debts to ignore are what are called “secured loans”. These have your house, car, or other object as collateral. With these, a creditor can come in and take the collateral back without bringing you to court. If you want to avoid losing your home or your vehicle, it’s important to keep a close eye on these debts and make sure you are at least trying to meet them.
Talk to your creditors
As in many things, communication is key. Many creditors are willing to work with you no matter your situation to help figure out a payment plan or other options that will work for you. The worst thing to do is try to ignore the situation.
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Seek financial advice
And at the end of the day, sometimes what you need is a little extra and external help. Sometimes getting help from a financial counseling organization can give you help with your budget, organizing the relative urgency of your debts, and getting a handle on your financial situation. This can be an excellent option, but be sure to check up on the company first. Unfortunately, there are a lot of disreputable organizations that will try to take advantage of a bad credit situation, so it’s important to protect oneself against that while working out of debt.