Reducing debt can be a daunting task, especially if you have a pile of it. It takes courage to try and tackle such an overwhelming undertaking, but lucky for you there are a variety of options available to help eliminate debt.

Take the first step

First things first, you have to stop spending. Easier said than done, right? Nevertheless, by simply cutting back on expenses and freezing the use of your credit cards, you will already get a solid start to reducing your debt because you won’t be adding more to it in the process. You should also jot down every dollar that you spend for a month as it will give you a better picture of where your money goes and highlights areas where you can save.

Consolidate your debt

Consolidating your debt can help you organize your debt into one convenient monthly payment and can even lower those monthly payments altogether. When deciding to consolidate your debt, you should average the interest rates on your current debt and look for a loan that has a lower interest rate than your current average. Watch out for loans that simply lower payments by prolonging the repayment period- you will pay more in the end. Some common debt consolidation loans include: home equity loan, line of credit, refinance and use your equity to pay off debt, unsecured loan (with higher interest rates), or credit card balance transfers (only if you have good credit).

Enroll in credit counseling

When you can’t seem to get a hold of your finances yourself, then it may be beneficial to employ the help of your local non-profit counselors. They are often times better skilled at negotiating lower interest rates and payments from your creditors and can sweet talk their way into lowering your debt completely. It’s important to choose a reputable counselor, because some will steal your money and make your credit worse than before. Also, make sure your credit counselor doesn’t report your association with the credit company to the 3 credit bureaus- it will show on your credit report for seven years that you were in a “suffering from debt program” and it will be more difficult for you to get future loans.

File for bankruptcy

When the debt you owe is too much to pay, you may want to consider filing for bankruptcy. Simply filing for bankruptcy is not a one-step option, though; an income-debt comparison is required in addition to consumer credit counseling before you can file bankruptcy.Analyze this option thoroughly, because there are always downsides such as: ineligibility for loans (even if your finances are outstanding), permanently disqualifying you from high-level jobs, preventing you from becoming bonded, risk of losing personal belongings (house, car, etc) and more. Use bankruptcy only if it’s completely necessary.

Settle your debt

Whether you do this yourself, or hire a professional debt negotiator, settling your debt can be extremely helpful as it can lower the total amount of debt that you will owe to the creditor. In some cases, you will only have to pay up to 45% to 65%of your original debt. Do your research, though, to make sure this option is best for you.

Regardless of what type of method you use to get out of debt, it’s important to start reducing debt now rather than later. Finding a solution may not be easy, but the longer you wait, the longer your debt has to accumulate. Remember if you get overwhelmed, there are financial experts out there who know how to work with creditors and can help you get out of debt affordably and quickly. In the end, you must do what is right for you and your situation.

About the author:

Compass Technologies is the company behind Kwik-Loan consumer finance software and Kwik-Dealer indirect lending software.