How To Get Out of Debt Without Losing Time and Money

How To Get Out of Debt Without Losing Time and Money

I dont have to tell you that time is money. Compound interest is proof of that. When youre serious about getting out of debt, some gurus would have you get gazelle-like and use a snowball or avalanche to get out of debt. While you live on beans and rice like no one else, its ironically like the all the third world countries, interest is being additional to your debts. The experts wont put a time limit, but you should. Heres why.

Life moves by quickly. Thats time. Financial goals need to be met like buying a car or a house, or saving for retirement. The time you take to get out of debt slows down your ability to meet other goals. The more money you use getting out of debt slows down this course of action already further. What do you do when youre stressed out and backed into a corner? You do everything you can to avoid the devastation of facing a possible bankruptcy because that would the be the worst thing ever, right? Read on.

Choices are the cornerstone of freedom we have in our country. Thats great news that you truly have choices when it comes to getting out of debt. First, well analyze each option. Then, well look at the numbers using an example of what it would cost under each method. From there you can make a better choice of the option that is right for you.

A debt avalanche (also known as debt stacking) targets debts with the highest interest rates first. A debt snowball plan, in contrast, prioritizes your smallest debt first no matter the interest rate. Each time the smallest one is deleted you move to the next smallest.

Alternately, consolidation is a new loan that rolls all the debt into the new loan. The average annual percentage rate (APR) on a consolidation loan is around 18.56%. To put that into perspective, the average range of interest rates charged on consolidation loans typically falls between 8.31% and 28.81%. Negotiating and settling debts for less than what is owed requires that you pay some of the debt and then pay taxes on the cancelled debt. The main problem with debt relief companies is the fact that they cannot stop lawsuits and it wreaks havoc on your credit report due to late and missed payments.

You can follow the gurus and use a snowball or avalanche method and repay your debts as you lose weight on beans and rice. Other options include consolidation and negotiated settlements, paying less that what you owe. Paying less than you owe does come with a tax bill for the cancelled. Each method has its pros and cons and affects credit availability. All the while interest continues to accrue, your credit score drops as you fall further behind and you may already get sued. What if you could find a way to repay your debts with all of these benefits rolled into one? Lets look at the numbers.

Lets use the example of someone who has a total of $30,000.00 spread over two accounts and a student loan. In addition, you are able to set aside an additional $200 toward debt payments after making the minimum payments on all three accounts. 15000

Credit Card A has a balance of $15,000, a starting minimum payment of $285, and an interest rate of 22.25% Credit Card B has a balance of $8,400, a starting minimum payment of $150, and an interest rate of $18.85% The student loan has a balance of $6,600, a monthly payment of $246, and an interest rate of 6.2% Avalanche will cost you $881 per month for 5 years paying a total of $44,528 Snowball will cost you $936 per month for 4 years paying a total of $44,898 Consolidation will cost you $552 per month for 10 years paying a total of $66,240 Settlement will cost you $475 per month for 5 years paying a total of $28,500 including fees and taxes Chapter 13 will cost you $500 per month for 5 years paying a total of $35,000 including fees Now that Ive laid out the numbers, you can see that the least expensive ways to eliminate debt fall between negotiated debt settlement or a chapter 13 bankruptcy case payment plan. already though debt settlement appears cheaper than bankruptcy, if a lawsuit is filed, the program will typically remove that debt from their program and leave you hanging. Also, if youre looking to preserve or enhance your credit score, this program is not right for you because the debt relief agency wont make a payment on that debt until you have enough money in reserves for them to negotiate a lump sum settlement. So, already though it appears to be the cheaper way, it may not be the best way based on ruined credit score, tax consequences and you may nevertheless wind up dealing with debts on your own if youre sued.

A 5-year payment plan in chapter 13 may be hypothesizedv to repay less than what you owe too, depending on the amount of assets you own and your income. So, the total amount you owe could be already less. Some of the benefits of chapter 13 include zero interest and no income tax consequences on the cancelled debt. already better is the improvement to the credit score because bankruptcy protection method that you cant be sued while paying debts by bankruptcy and since youre making payments, you should see your credit score enhance while youre in repayment.Now that Ive laid out the numbers, you can see that the least expensive ways to eliminate debt fall between negotiated debt settlement or a chapter 13 bankruptcy case payment plan. already though debt settlement appears cheaper than bankruptcy, if a lawsuit is filed, the program will typically remove that debt from their program and leave you hanging. Also, if youre looking to preserve or enhance your credit score, this program is not right for you because the debt relief agency wont make a payment on that debt until you have enough money in reserves for them to negotiate a lump sum settlement. So, already though it appears to be the cheaper way, it may not be the best way based on ruined credit score, tax consequences and you may nevertheless wind up dealing with debts on your own if youre sued.

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