Many Roads, Same Destination: How Real Americans Have Gotten Out of Debt

by Susan Paige
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Like most destinations on the map, there are many ways to reach Debt Free, U.S.A. People take a wide variety of routes to achieve freedom from debt depending on their exact circumstances, but the view from the top is the same for everyone: a more independent, less stressful financial life. Here are examples of how real Americans have gotten out of debt on their own terms.

Slash How Much You Spend

NerdWallet tells the tale of a self-proclaimed “born spender” entering her marriage with nearly $24,000 in credit card debt and student loans. She decided to go on a spending fast by categorizing all expenses as wants vs. needs, then buying only necessities as she paid down her debt. She was able to get rid of this debt in 15 months — and is now debt-free besides a mortgage she has under control.

By itemizing every purchase and trimming whatever you can do without, you’d be surprised how much extra money you can free up for debt repayment.

Try Do-It-Yourself Debt Repayment

Many consumers have found success by either “snowballing” or “avalanching” their debts.

The former means paying off your smallest debt first while paying the minimums on all others. Once this small balance is cleared, you move up the ladder to tackle the next-largest debt, and so on. The goal here is to stay motivated by racking up little wins along the way.

The avalanche method entails tackling whichever debt has the highest interest rate first — while paying the minimums on all others — and moving down the line. The goal is to eliminate whichever debts will technically cost you the most as soon as possible.

Negotiate with Creditors

Many consumers are unaware creditors may be willing to negotiate on debts, preferring to get something in a timely manner than nothing, ever. Debt settlement is an alternative to bankruptcy for those with significant unsecured debt, like credit cards and medical bills.

Results will vary, but the basic process looks like this: Debt settlement participants deposit monthly into a special account they control. Once enough has been saved, negotiators contact creditors directly, attempting to reach a settlement agreement lower than the original amount owed. If creditors agree to settle, the money from the account goes toward wiping that debt and the program takes a percentage as a fee.

One enrollee from Ontario, CA wrote in her Freedom Debt Relief review how she decided to try settlement — cautiously, with plenty of research first — when she found herself drowning in debt following the deaths in her immediate family. She “decided to commit to a new financial lifestyle change, which would be beneficial for me and would shave off almost $12,000 dollars from [her] debt.”

Doing a Debt Management Plan (DMP)

You may find you’re eligible for a debt management plan (DMP) after meeting with a credit counselor. This is a multi-year plan to repay debts through an agency — so you’ll make your payments to the agency and it will disperse payments to creditors. These agencies oftentimes have some sway with creditors, potentially earning you an interest rate reduction.

One married couple found themselves $52,000 in credit card debt and still charging household expenses to cards. They knew they had to change. Working with a non-profit counseling group helped this couple shave off more than $300 from their total monthly payments, and they were able to make a single lump payment to the agency instead of trying to juggle nine bills.

Consolidating Debts into One Payment

Another way to consolidate debts is to take out a loan, use it to pay off your other high-interest debts, then repay this single loan over time. Many Americans have found it easier to keep up with a single loan payment than deal with a cadre of creditors. Before taking out a loan, always make sure you can commit to fulfilling its terms — and that you won’t be paying much more in interest over the long term.

You can envision the destination: zero debt. Now you just have to map the route you’ll take to get there.

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