During my sophomore year of college, I walked to class every day past tables where people tried to get students to sign up for credit cards by offering free t-shirts, water bottles, or key chains. I gave in and got a credit card. I got preapproved offers in the mail, and within three years I had 13 credit cards and owed $10,000.
When I moved out on my own, things really got worse. I lost my job after six months, and my credit got even worse: I owed $11,000. My boyfriend agreed to pay the car note, so I bought a car for him in my name. He stopped paying for the car, so it was taken away from him. On top of the $11,000 I already owed, I had to pay another $8,000. During this time, I had a full-time job and made $21,000 a year.
I made a budget and made plans with each creditor for how to pay them back. I got a part-time job to help me pay off my bills. For a year, I did both jobs. By the end of the year, I saw results and had paid off some of my debt. But the whole process of getting out of debt took four years. Here are 10 ways that I paid off my debt:
- Sell some items. Sell things like jewellery, a second car, and clothes, or have a yard sale to get rid of things you don't need.
- Lower your rate of interest. You can talk to your creditors about lowering your interest rate if you have a good credit score and haven't been late with any payments in the past year.
- Set up a payment plan. Set up a plan with each of your creditors for how you will pay back your debts. Be honest, modest, and true. Make a list of the terms and deals you want to make and stick to them.
- Reduce expenses. You could pack your lunch every day for work, buy things on sale, or shop at a wholesale store like Costco. You could also carpool or take public transportation to work. You could cancel your cable, cell phone, or Internet service or get the cheapest plan you can. You could also buy energy-efficient appliances, programmable thermostats, or hot water insulator jackets.
- Don't move money around. If you move a balance from one credit card to another, it could hurt your credit score, and there may be fees involved. Before the introductory rate ends, it's important to pay off the whole balance, because after the introductory rate ends, the interest rate may go up a lot.
- Pay more than just the minimum each month. If you only make the minimum payment each month, you will end up paying two to three times what you originally charged because of interest and other fees. Each month, try to send more than you have to.
- Make a plan to pay off your debts. Set up a plan to pay off your debt so you can organise your bills. Using the "debt snowball" method, you can pay off some of your debts quickly. Start by paying off the smallest bills. Then, use the money you used to pay off one bill to pay the next one. Keep doing this until you have paid off all of your debts.
- Accounts for getting money. Most of the time, a collection agency is called when a bill is 90 to 120 days late. Talk to the person who gave you the loan to see if you can set up a payment plan. If that doesn't work, you can set up a payment plan with the collection agency.
- Settlement. Some creditors will negotiate with you by asking for a "settlement" of a smaller amount to pay off the debt quickly. However, it is best to pay the full amount because a settlement on your credit report could lower your credit score.
If a creditor keeps calling you and is being annoying while you are trying to pay off your debts, tell them your situation, get their name, the date and time they called, and tell them when you will be able to make a payment. Don't try to get new credit or a cash advance or payday loan. If you follow these 10 tips, you'll be able to get out of debt and move toward a life without debt.
