Personal Finance Ology

There are many substantial ways to getting out of debt. However, there are some common ways of getting out of debt that are not as advantageous as we tend to think.

Bankruptcy
This seems like the easiest answer because once it’s done a lot of your debt is erased. However, this is where your wise decision skills should come into play. While considering bankruptcy, think about the long-term effect it will have. Now that have you have decided to create financial abundance there is going to be a time when you are able to pay off your debt and take part in many advantageous opportunities. If you file bankruptcy this will stay on your credit for years and that will hinder you from being able to take part in those opportunities.

Remember to always look at the long term effect of your decisions rather than choosing instant gratification and consult the advice of a well researched attorney if you feel the desire to learn more about your current financial situation as it relates to bankruptcy.

Debt Consolidating Companies
A lot of these companies put you on a program where they total up the sum of all your debt and arrange an “affordable” monthly payment. However, in most cases, that “affordable” monthly payment is only paying the interest and doesn’t even touch the principle balances you owe. It would be better to contact your creditors on your own and negotiate a repayment plan that lowers the remaining balance and also does away with the interest rate. It may take some time but anything is negotiable.

Credit Repair Companies
There are a lot of reputable companies to choose from but there are a lot of unreliable companies that perform illegal ways of removing negative items from your credit. When deciding on a credit repair company be sure to do your due diligence and get as many references as possible.

Transfer Funds
There’s the method of transferring the balance from a higher interest card to a lower interest card to save money. This is profitable only if it is done wisely. It is one thing to use the lower interest card to pay off the balance on your higher interest card, however it is not wise to make it a cycle. Once you have transferred the balance from the high interest credit card to the lower interest don’t go and run up the balance on the high interest card again. This only creates a pattern of instability and continuous bad debt.

More Loans
Just as with transferring funds, refinancing your home to consolidate your debt can yield great results. This can happen only if it is done right the first time. After you have paid down your debt and gotten control of it it’s not wise to go out creating more debt for yourself. When you do this you are not only putting yourself in the same position by doing the same things but you are also wasting the equity you worked so hard to build in your home. Therefore, if you are going to refinance your home to pay off your debt do just that and be responsible enough to not incur anymore.

Related posts:

1. Debt Management
2. Understanding Good Debt Vs. Bad Debt
3. Create Your Dream Home And Put Money In Your Pocket
4. Clean Up Your Credit Score (Part 2)
5. The Basics of Interest: Part 1