Nine Ways to Pay Off Debt

The Motley Fool gives nine ways to pay off debt and I thought this was something many of you would like to see. Here are the ones that I recommend:

Pay more than the minimum. Break the habit of only paying the minimum required each month.

Snowball your debt payments. Take a long, hard look at all your credit cards. Pay particular attention to the one with the lowest interest rate. Have you reached the maximum limit on that card? If not, consider transferring a higher interest bill to that one.

Cash out your savings account. You could cash out your savings and investments and use the proceeds toward debt repayment.

Finagle family and friends. Perhaps your family or friends could help through a loan.

Renegotiate terms with your creditors. Let your creditors know your situation.

You can read the rest of the article if you like, but their other four aren't really worth it in my opinion. These five, however, are good suggestions for people who really need help getting their debt under control.

Comments

[FInancial Fruition]

Most of these I agree with. However, finagling family and friends is something I would not recommend. It puts your relationship with that family member or friend in jeopardy. For instance, if you get a loan from a friend or family member and all of a sudden they get a postcard from your week in Aruba, they may get a little miffed and then your relationship with them will only go downhill.

Financial Fruition
financialfruition.blogspot.com

[Glen Harness]

I've never seen such bad advice. Not one of these is worth the electrons it took to get to my computer. The first two should be combined into "pay more than the minimum on the card with the lowest balance, until it's paid off, then take what you were paying on that card, add it to what you're paying on the next lowest balance card, and pay that off." That's a debt snowball, not moving money around from one card to another (yeah, it's what Dave Ramsey preaches about). Cashing out your savings accounts? Stupid idea. First off, you shouldn't have "saving's accounts"; the money should be in a mutual fund. Secondly, if you're that bad off, maybe bankruptcy is an option. The first commenter nails it on the "finagling family" one.

[FMF]

Glen -- You're a bit grumpy for someone from middle TN aren't you? When I lived in Franklin, someone with your comment would say, "Now I think y'all may have some problems with this one" then break it to me real gentle-like. ;-)

Anyway, I dislike the family one as well (for the most part). But it is among the best in the article. Situations vary. When someone in my family asks for a loan, I GIVE them the money (not asking to be repaid) as long as it's reasonable.

Financial Fruition -- I blogrolled you. I'll be interested to see your progress. ;-)

[Dus10]

I also think that is a bit grumpy. Besides, I have not seen a money market account that has better interest than HSBC, ING Direct, or Emigrant.

[Sean]

One question....I have heard that "negotiating" w creditors by saying you will take drastic steps will result in a "settlement" record on your credit...which lowers your credit further. This seems counter productive. Please comment

Thanks

[FMF]

Sean --

I've never heard of this situation. Doesn't mean it won't/doesn't happen, but I can't comment on it.

Overall, I think the best policy is to work with your creditors to pay off the debt. Most will help you pay them back as they'd rather have their money back than not. Before agreeing to anything, though, it would probably be safe to ask them if and how your potential agreement with them will be reflected on your credit report.

BTW, if you are having problems paying of your debts, you probably shouldn't be thinking about taking out more credit (if that's why you're worried about your credit score).

Good luck!

[Outta-Luck]

After a devastating accident that left me disabled and grossly in debt, I tried to negotiate with creditors. I was told they in fact preferred that I declare bankruptcy, because they were insured against that and would get paid anyway. If I tried to work out a longer term, lower interest payment schedule they would loose rather than get a quick ending. Didn't work for me.

[Patty Bryant]

If you have not entered into a lot of debt than don't. And if you have than call your creditors and see what kind of plan that they have that you might can afford. I am having a hard time paying sears off, so if anyone have any IDEAS please let me know. It is the small bills that eat me up. Any one that may hit the jackpot please remember me.

[Pay Off Debts]

How about not incuring the debt at all.

Temptation- When ever you feel you just have to have buy something, take a deep breath, step back, and think it over for 24 hours. You may find that you really didn't need it after all.

[Maggie Dufuss]

This is how I'm starting to pay off debt that I shouldn't have incurred in the first place. I recognize that I'm a Dufuss and then set about to change my ways.
I take my credit cards OUT OF MY WALLET before I leave the house. I also leave my checkbook behind. I use cash only. If I get into some kind of trouble-the truck breaks down, or other-I'm always in about a 5 mile distance of someone from my family who can come and help me. It's a small town. I call my creditors and tell them that I'm going to go to Consumer Credit Counselling. Creditors don't like this at all and there is a record of my actually doing this many years ago. Creditors get SO nice when you mention this to them, that you USUALLY can work with them to pay off your debt, w/o the threats. The main thing is to start ASAP! Before bankrupty as the only alternative.
I agree. Think it over for 24 hours. Figure out how many hours of work it will take to pay CASH for this item that is so tempting. There are lots of other ideas out there. These are just the types of things that have worked for me.

[Kim Snyder]

I disagree completely with the comments posted.

I am a cancer survivor. Our debts got out of control while I was on chemo and unable to participate in our financial decisions, and then my cat died, which just sent us over the edge, with over $40,000 in credit card loans, and medical expenses on top of that.

Frankly, if it had not been for the advice of my Aunt, who has corporate experience as a financial advisor, and a Cousin-in-law, who does finaical advising for couples in financial distress, we would have had to file for bankruptsy. We have upped our payments, snowballed our payments, gotten assitance from my Aunt, negotiated with the credit card companies, gone to auto payments with several companies, cashed out savings, and simply quit spending money in order to pay off those bills, and we will have those "bad" debts paid off in another year and a half!

[pay off bills]

Cut up all your credit cards except one, either visa or mastercard. That makes keeping track of your expenses a whole lot easier.

[Paul Lambert]

Stay away from credit. Period!

Never borrow money if you can help it. This even applies to mortgages.

When you are 14 years old and getting your first part time job, save half of everything you earn (since your parents are supporting you anyway) in some kind of compound interest arrangement.

Then when you are 25 you can buy a house outright. No mortgage.

Those of us who are older can simply try to pass on this information to the younger generation. As for us, simply resolve never to borrow any money again, certainly not for consumer things. This includes education.

[Susan Miram]

I completely agree with Paul Lambert's post. I wish I could turn back the clock and put all my income into savings and investements. When I was 18-21, I lived at home a good deal of the time and had 21,000 a year which was equivalent to around 35-40 now and had no idea about investing. Those years are lost now. If you don't have enough $ to afford your current expenses, including groceries, don't live on a credit card . . . . if you can't afford your expenses now, you won't be able to afford the extreme interest on a credit card. The interest will be over 50 percent of the debt monthly and well beyond that over time, because your payemtns will barely chew the debt down each month. It's a prison. You will need a job that pays well beyond your current expenses to get out of this prison. Dont' assume it will all work out, because the prison is totally not worth it. As difficult as it might be, it's going to be much easier to face your circumstances now and figure out a way to get beyond it without incurring debt, than to get beyond a credit card debt later.

[Marnet]

My spouse passed some years back and I was a student finishing up my degree---working only part-time---after the insurance company took so long advancing me with proceeds---I owed funeral home and everybody--I paid off some debts and put away some savings--but ended up spenting it on mortgage--didn't have mortgage insurance--after death---and after graduating a year later--i fell and hurt myself on a flight--after working out so long before the trip---had a mishap whereas I had to go to emergency after the flight--I managed to grow new debts with medical bills, credit cards ect--later in Dec I lost my job--and spent the rest of the savings----I commuted to work 75 miles-home on weekends--then managed to rent a cottage and drove home 2x a month---now with the economy so bad--I can't sell the property so I am sweating with a live-in nurse job and I have had it---I tried to file bankruptcy and the lawyer said I didn't have enough debt--and NOW I am living with my daughter--who has a mental disorder--and I am in my middle 50's----so what do yu do---I pray a lot---and managed to get through so far--but life isn't sweet---the property is valued at 100,000 with a 65,00 balance--and I still have to pay the insurance and taxes and my car broke down---I hadn't had to make payments in 25 years--now I'm paying a car note---so stop complaining!

[dan]

Just over $40k in cc debt, bad choices, over a year looking for a permanent job, finally got one :)

I too used to get a bit uncomfortable with those that complained about 5-10k debts, but stop the 'hating.' The truth is that it is all relative! For those who have never had the amount of debt that some of us have unfortunately accrued, their 5-10k seems just as daunting as our 40k. Although, surely, my 40K does not seem as big to those of you with 100K+ debt. I think you get the point.

What ever our maximum debt is, 5K, 40k, 80k, it is overwhelming and discouraging. Let's not put down those that have less debt. Instead, let's be examples to them as to what can easily happen with the debt trap. To all reading this...hold on to real stories of people that have made it, and work your tail off. Keep the faith, it can get done!!! I hope to come back and post as I make progress!!! In the meantime, no more cc debt! No way!

[Shell]

I am just starting out trying to get out of debt. I wish like the other guy I would of learned along time ago to save all that extra we had. Now I have put us in a Financial mess. Have any of you tried the CCC companies and do they help. I can't file bankruptcy because I have one going to college in 2 and half years. I am so lost I owe way to much money to people and it is stressing me out. PLEASE ADVICE!!!!!

[Jacquie]

Is there such a thing as free money? I am in debt up to my ears because of a series of job loses. The lose of job was because of the company downsized. It happen to my husband and I. I need at least $250,000 to become totally debt free. I do not wish to borrow money. That is part of my problem. Is there any way to get what it called free money? Is there such a thing?

[pay off credit cards]

Those are good ways on trying to pay off credit card debts. All are attainable. To add up, one must have discipline not to use the credit cards again until they are all paid off. In that way, one will not acquire more additional debts.