My Debt Blog

I hear various offers and ads on how to get out of debt. There’s so many methods out there I figured I would give my analytical look at each one. Some of these I’m actually considering doing and others are not even worth my time looking further into.

Ways to get rid of credit card debt:

• Make the minimum payment each month - I was using this calculator over at Bankrate to figure out how long it would take to pay only the minimums to rid myself of credit card debt. Needless to say it would take over a decade and I would pay several times over what I actually owe present day.
• Pay off accounts from highest to lowest interest rate - If I look at the simple math, it would make sense in theory to pay less interest over a long timeline.
• Pay off accounts from lowest to highest balance - This is the “Dave Ramsey” system in a way, I read about this before so I cannot give him full credit, by paying off a small balance first and applying the payment to the next debt helps decrease principle faster which should in turn reduce and eliminate debt faster.
• Using home equity/consolidation loan - Taking the credit card debt and converting it from high interest unsecured to lower interest secured debt. Partial benefit of this is being able to use the interest paid as a tax deduction come tax time.
• Debt payment plan - Some companies out there will basically take over the credit card payments for you by paying them a lump sum every month. These services do cost you though, roughly 20% of the original debt you’re paying goes to them. Why pay someone else to make payments for you?
• Debt settlement - I hear so many offers where you can save, “up to 50% on the dollar” off your debt. The problem with these debt settlement services is you are paying them to build up a payoff in order to settle your debt. Most of the time this is done instead of just paying on the debt, which will destroy your credit. You can also handle debt settlement yourself without a need for a third party.
• Bankruptcy - Too much debt? Hit the reset button and get a clean start! Yeah right. Credit reports stay messed up for 7-10 years and it is a long struggle to re-establish credit. I think some people out there think this is some sort of safety net for their poor mistakes they made with credit.

I use a combination of some of these methods to get my debt under my control and not let it control me. As various credit card offers throwing the 0% interest come across my hands, I do consider the math in terms of if I were to transfer a balance to it I could pay pure principle on that debt and eliminate it faster. The other is to get the high interest debt into a secured loan or transfer it to one of those life of the balance cards. By converting the debt into other forms does not pay it off, but it helps motivate me to get it paid off faster and pay less interest. If I missed something by all means let me know.

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