Nobody wants to be in debt, but sometimes, because of situations beyond your control, getting a personal loan might become necessary. However, if you just have a little debt, you have to keep up your payments and make sure it doesn’t get out of control.

On the other hand, when you have a large amount of debt, you have to put more effort into paying off your debt while juggling payments on the debts you’re not currently paying. The idea of paying debt with debt might not seat well with you. But by the end of this article, you will have a good knowledge of how you can pay back your debt with debt. Here are the talking points.

• What is Debt
• What a Personal Loan
• What Kind of Debt is Good Debt
• How To Get Out Of Debt On A Low Income
• How to Pay Off Debt Fat With Low Income
• How to Payoff Debt Fast
• Fast Loan Payoff Calculator
• How to Get Rid of Debt Without Paying
• How to Overcome Credit Card Debt
• Best Debt Consolidation Loan
• Best Debt Consolidation Loan Company?
• Common Types of Debt
• What Types of Debt Should You Avoid

What is Debt

Debt is an amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

The most common forms of debt are loans, including mortgages and auto loans, personal loans, and credit card debt. Under the terms of a loan, the borrower is required to repay the balance of the loan by a certain date, typically several years in the future.

The terms of the loan also stipulate the amount of interest that the borrower is required to pay annually, expressed as a percentage of the loan amount. Interest is used as a way to ensure that the lender is compensated for taking on the risk of the loan while also encouraging the borrower to repay the loan quickly in order to limit his total interest expense.

Credit card debt operates in the same way as a loan, except that the borrowed amount changes over time according to the borrower’s need, up to a predetermined limit, and has a rolling, or open-ended, repayment date. Certain types of loans, including student loans and personal loans, can be consolidated.

What a Personal Loan

A personal loan is a loan that you qualify for based on your credit history and income. Personal loans are sometimes called “signature loans” or “unsecured loans” because there is no collateral to secure a personal loan. Instead, lenders approve personal loans by evaluating your creditworthiness.

Personal loans are relatively easy to apply for and qualify for when compared to home and auto loans. That makes them useful for everything from small home improvements to expensive purchases. You can use the money for almost anything, but it’s wise to borrow only as much as you need—and only for things that improve your finances or make a significant impact on your life.

What Kind of Debt is Good Debt

While it’s possible to live completely debt-free, it’s not necessarily smart. Very few people earn enough money to pay cash for life’s most important purchases: a home, a car, or a college education. The most important consideration when buying on credit or taking out a loan is whether the debt incurred is good debt or bad debt.

Student Loan

Good debt is an investment that will grow in value or generate long-term income. Taking out student loans to pay for a college education is the perfect example of good debt. First of all, student loans typically have a very low-interest rate compared to other types of debt. Secondly, a college education increases your value as an employee and raises your potential future income.

Mortgage to Buy a House

Taking out a mortgage to buy a home is usually considered good debt as well. Like student loans, home mortgages generally have lower interest rates than other debt, plus that interest is tax deductible. Even though mortgages are long-term loans (30 years in many cases), those relatively low monthly payments allow you to keep the rest of your money free for investments and emergencies. The ideal situation would be that your home increases in market value over time, enough to cancel out the interest you’ve paid over that same period.

Auto Loan

An auto loan is another example of good debt, particularly if the vehicle is essential to doing business. Unlike homes, cars and trucks lose value over time, so it’s in the buyer’s best interest to pay as much as possible up front so as not to spend too much on high-interest monthly payments.

Home Equity Loans

Good debt can also simply be low-interest debt. Home equity loans are usually considered good debt (or at least “better” debt), because their interest rates are lower than other types of debt, like auto loans or credit cards. With a home equity loan, the lending institution uses your home as collateral.

The amount and interest rate of the loan depends on the appraised value of the house. While it may seem smart to consolidate other debts under a lower-interest home equity loan, carefully consider whether or not you can really make the payments. If not, you could end up losing your home.

How To Get Out Of Debt On A Low Income

Now that you are already in debt your next line of action will be to pay back as soon as possible. But it might be difficult for you to do so if you have little or no income. But the good news is that you can pay it off without selling your assets or taking any drastic action. Below are some tips to help you.

Take stock of your financial situation

You can’t fix the debt that you don’t acknowledge you have, because one of the most important elements of any debt-reduction strategy is choosing which debt to tackle first. Sit down at a computer—or with an old-school paper spreadsheet if that’s your style—and write down all of your debts.

As you’re working, make sure you list the amount, the interest, the term, your monthly payments, and the available credit limit for each debt. This will help you understand the full breadth of the situation, and give you solid numbers to work with when you create a budget (spoiler alert).

And while you’re at it, make separate spreadsheets to list all of your other monthly expenses—things like food, utilities, car payments, etc.—plus one for all the money that you have coming in from various sources.

Make a budget using zero-sum budgeting techniques

Nobody likes making a budget. But trust me: this is the only way you’ll manage to get your debt under control.

Once you know all your expenses and debts, you can go through the process of allocating your monthly income as necessary. Holly Johnson is a personal finance blogger, and she once found herself buried under a mountain of debt. She used zero-sum budgeting to get out.

“Zero-sum budgeting gives you the tools to improve your finances by teaching you how to a) live off last month’s actual income instead of income projections, b) make actionable decisions regarding your money, and c) reduce waste,” she explains.

The idea behind zero-sum budgeting is that at the end of the month, you don’t have a single cent leftover because every dollar has been allocated to bills, debts, and savings. This may sound a little unsettling, but it will help you regain control much faster.

When you create your budget, the first things to take care of our savings and debts. Then you can use what’s leftover for everything else. If you have to cut expenses somewhere, it comes from things like entertainment and transportation rather than debt-reduction or investments.

Look at Your Biggest Expenses and Trim Down

Once you know where you’re at regarding your debts, expenses, and budget, you must take steps to close the purse strings. You can’t get out of debt if your debt keeps growing. Because you can’t take that money from debt payments or savings, it’ll have to come from elsewhere.

Go over your budget and categorize your spending to see where you’re spending too much money—on transportation or eating out, for instance. Then make an expenditure reduction plan. Here are some ideas:

• Buy food in bulk, especially when it’s on sale
• Clip coupons for everything that you buy, from food to clothes to toiletries and more
• Sell your car (if you have one) and walk or bike to work—if you’re like most people, you spend an average of $9,000 a year on your car
• Cook more at home and eat out less
• Cut your subscriptions for things like cable and the gym, and opt for lower service packages for necessary things like cell phones and internet
• Bring your daily coffee from home rather than buying out
• Always buy used: check thrift stores and classifieds when you need to buy anything, including clothes, furniture, vehicles, and even appliances

How to Pay Off Debt Fast With Low Income

Set goals and find accountability

You can’t succeed on your own. Without solid goals and accountability, you’re much less likely to ever become debt-free.

In fact, in a study done by psychology professor Gail Matthews of Dominican University, it was found that sharing your goals with a friend is the key to accomplishing your goals. In her study, Matthews found that people who both wrote down their goals and had an accountability partner had a 76 percent success rate of accomplishing their goals. In comparison, there was another group in the study which was instructed to only think about individual goals. Only 43 percent of those people accomplished their goals.

So, practice writing down goals following the SMART method. With this method, your goals meet the following criteria – Specific, Measurable, Achievable, Relevant, and Timely. Once you’ve developed your SMART goals, share them with a friend or two. Ask a trusted friend or family member to check in with you and hold you accountable.

Focus on increasing your income

Cutting back on your spending certainly helps you pay off debt faster. But unfortunately, there is only so much you can cut out.

One way to pay off debt quickly is to trim your expenses and increase your income at the same time. Then, use your freed up cash to throw extra payments towards your debt. There are thousands of ways you can increase your income. For you, maybe that means finding a higher paying 9 to 5 job. Or, you can start side hustling to earn a few extra hundred dollars each month. These are just a few ideas to get you started:

• Drive for Uber or Lyft
• Babysit on the weekends
• Start blogging or freelance writing
• Have a garage sale
• Mow laws
• Pick up part-time or seasonal work

Once you start earning more money, put the entire amount of extra cash towards your debt. You’d be amazed at how much faster you can progress when you can put $100, $500, or even an extra $1,000 a month towards your debt.

Create an emergency fund

While you may be eager to jump right in and start tackling your debt, if you don’t have an emergency fund, this is a good first goal.

Without an emergency fund or financial buffer, any unexpected costs can derail your debt repayment process. Maybe your car breaks down and needs repairs, or you had a larger heating bill than you budgeted for. Whatever the case, when emergencies come up, you need money – and fast.

So, start an emergency fund now with a separate savings account. This way you aren’t tempted to use it for your day-to-day spending. If this feels overwhelming, start small. Even $500 saved up can help you out in a stressful financial situation.

Consider refinancing

If you have debt, it’s a good idea to find out if you can save money by refinancing your loans.

Refinancing your debt essentially means another company buys out your debt. In return, you start making payments to your new debt servicer, and this new company then collects your interest payments.

Refinancing companies typically offer you a lower interest rate to gain your business. This helps you because over time, you won’t have to pay nearly as much money in interest and can make a bigger dent in your principal loan balance.

Take it from me: it’s worthwhile to do your research on refinancing if possible. A few years back, my husband and I refinanced some of our student loans and now pay a two percent lower interest rate than we were originally paying. This is saving us thousands of dollars in the long-run.

Give yourself a guilt-free allowance

Even if you’re taking all the right steps, it can take years to pay off debt. In order to stay in the debt-repayment game for the long-haul, it can be imperative that you give yourself a little break once in a while.

The idea here is to give yourself a small, guilt-free allowance each month. Because it’s already in your budget, this is money you can freely spend without feeling regretful. The concept of a financial allowance is a lot like dieting. People are more successful when they allow themselves a rest day and a cheat meal once a week. It can keep them from feeling deprived and prevents large, impulsive purchases later.

So, factor a little free spending into your budget. Whether you give yourself $15 a month to go to the movies or $30 for a night out with friends, the choice is yours to enjoy…guilt-free of course.

How to Payoff Debt Fast

Getting out of debt is truly a challenge. Below is a step-by-step plan so you can reach your debt payoff goals:

1. Recognize and accept that you have a debt problem – Be honest about your debt issues with friends and family – they can help hold you accountable! While embarrassing, the more people you tell, the more motivation you’ll have to reach your goal.
2. Stop increasing your debt – Adjusting your lifestyle isn’t easy, but it is necessary to get out of debt. Live within your means! Cut up credit cards, and avoid all loans. If you can’t pay with what’s in the bank, don’t pay at all.
3. Calculate all your debt – Gather your latest statements. Make a list of all your debts, the amount you owe on each, the monthly payment for each, and most importantly, the current interest rate on each loan.
4. Rank your debts – Start by ranking each debt according to the highest interest rate. Some debts are more urgent than others because the consequences of not paying them are more serious. Pay the highest interest rate debt first to minimize your total interest cost.
5. Figure out how much you can afford to pay every month – Review your budget to figure out how to free up some money for debt repayment. Direct all your extra money to pay off the most important debt on your list. There is no right or wrong approach for allocating money to pay off debts. Your approach will largely depend on your financial situation – and when you want to reach your goal. Just use the Debt Payoff calculator to know how much you need to allocate each month for paying off your debt.
6. Organize a payment – Focus on paying off one debt at a time. When the first debt is paid off, use the cash that is freed up to pay down the next debt on the list. For more information on this process.
7. Stick to your debt plan and discipline yourself – Don’t acquire new debt. Toss out your credit cards. Make up your mind to buy necessities only, except for the occasional treat to reward yourself for paying off a loan.

Fast Loan Payoff Calculator

Use this debt payoff calculator to figure how much you need to pay each month to be out of debt by a selected payoff date.

If you have multiple debts then use this Debt Snowball Calculator to plan the fastest way to get out of debt using the rollover method.

How to Get Rid of Debt Without Paying

If you have the chance to avoid bankruptcy, you should take it. Here are some alternatives to consider.

1. Supplement your income: Whatever you need to do to start paying off your debt, do it now. Ask for a raise at work or move to a higher-paying job, if you can. Get a side-hustle. Start to sell valuable things, like furniture or expensive jewelry, to cover the outstanding debt.
2. Ask for assistance: Contact your lenders and creditors and ask about lowering your monthly payment, interest rate or both. For student loans, you might qualify for temporary relief with forbearance or deferment. For other types of debt, see what your lender or credit card issuer offers for hardship assistance. If you have the means, see if friends and family will help you.
3. Take out a debt consolidation loan: If you have many different types of debt, look into consolidation options. Taking out a debt consolidation loan is a way to simplify your finances — putting all of your debt in one place — and potentially pay less interest in the long run.
4. Get professional help: Reach out to a nonprofit credit counseling agency that can set up a debt management plan. You’ll pay the agency a set amount every month that goes toward each of your debts. The agency works to negotiate a lower bill or interest rate on your behalf and, in some cases, can get your debt canceled.

How to Overcome Credit Card Debt

Here are some practical ways you can quickly tackle your maxed out cards and take your first real steps toward getting out of debt.

Create a Monthly Spending Plan

To learn how to get out of debt and to stop borrowing from your credit cards again and again, you will need to create a monthly spending plan for your money. Not only will this ensure you are living within your means (and not above your income, which is where credit card debt comes from), but it will also give you a set timeline on when you can expect to get debt free.

Ask your creditors for lower interest rates. Often a simple phone call to the issuer is all it takes to get a reduced rate—provided that you have good credit (a score of 730 or higher) and you are a long-term customer who makes payments on time. You could get a percentage point or two shaved off, which can add up to hundreds of dollars saved annually. One tip to try: “If you’ve been offered a lower rate by a competitor, tell the customer-service rep,” says Bill Hardekopf, the CEO of LowCards.com, a credit card comparison site. “There’s a chance they’ll match the offer.”

Use a peer-to-peer lender. In an ideal world, you would pay off your credit card in full and be free and clear. But if you can’t do that, consider borrowing money to pay off your card from a peer-to-peer lender, such as LendingClub.com or Prosper.com. These secure sites offer loans with fixed interest rates that can be 20 to 30 percent lower than most credit cards, meaning you could save hundreds of dollars in interest on your debt, says Lynnette Khalfani-Cox, a cofounder of AskTheMoneyCoach.com, a personal finance site. If you have a job and a good credit score, you may qualify to make an online loan request for up to about $25,000.

Target just one card first. If you’re carrying balances on multiple cards, it’s a long slog to wipe out those debts. So give yourself a boost of instant gratification right from the start, says Mary Ann Campbell, a certified financial planner in Little Rock, Arkansas. Ask yourself: What short-term financial goal will make me feel as though I’m making meaningful progress on debt reduction?

If your answer is “Having one card totally paid off,” then throw as much money as you can toward the card with the lowest balance first, says Curtis Arnold, the founder of CardRatings.com, a credit card comparison site. (Yes, do this even if you need to pay only the minimum on your other cards in the meantime.)

If your answer is “Boosting my credit score,” then tackle the card with the highest utilization rate (that’s your balance divided by the card’s limit). “Since your score takes a hit if you use more than 20 percent of your available balance, bringing the utilization rate down just 20 percent could significantly increase your score,” says Arnold. And if your answer is “Paying less in interest,” then the tried-and-true method is to pay off the card that has the highest interest rate first.

Transfer your balance (cautiously). It’s tempting to move a balance from a card with a high interest rate to a card with a substantially lower one. And potentially that’s a smart move; you can save hundreds of dollars a year. But be careful: You should transfer a balance only if you’re committed to paying off the debt within an introductory low-interest-rate window (which typically lasts 12 to 18 months after the first billing cycle closes) and to making monthly payments on time, says Arnold.

Otherwise your rate could skyrocket, possibly ending up higher than the one you just got rid of. (Important: You should also avoid making any purchases with the new card, as sometimes the low interest rate won’t apply to them.) In addition, know that you’ll probably be charged a balance-transfer fee, which is usually about 3 to 4 percent of the total amount transferred.

Trim Your Expenses to Free Up Some Cash

One way to speed up your debt repayment and get out of debt fast is by reviewing your monthly expenses and looking for opportunities to cut your costs. Start by tracking your spending for a two-week period to become aware of where your money is going (one month is even better). You may be surprised to learn that making your cup of coffee in the morning instead of buying a $3 specialty drink will save you over $1,000 a year! Check your spending to see if you can find more ways to save some money.

Best Debt Consolidation Loan

A debt consolidation loan is a type of personal loan you can use to combine high-interest debts and allow for one low-interest payment. Debt consolidation loans can cover your unsecured debts, which may include:

• Credit card bills
• Medical bills
• Personal loans
• Payday loans

Best Debt Consolidation Loan Company?

PersonalLoans.com

PersonalLoans.com provides loans from $1,000 to $35,000 with interest rates starting at 5.99%. Repayment term options are vast, beginning at 90 days and lasting as long as 6 years.

Unlike many lenders that require high credit scores in order for applicants to earn approval, PersonalLoans.com is known for giving people with less than stellar credit a chance.
PersonalLoans.com, another peer-to-peer lender, does not charge its customers any fees for connecting them with lenders, and individuals who borrow through a PersonalLoans.com lender usually receive funds within one day.

Upstart

Founded by former Google employees, Upstart stresses that you are more than a credit score, and emphasizes that the company considers your job experiences and education in determining loan approval and rates. At Upstart, loans range from $1,000 to $50,000 and offer interest rates from 5.67% to 35.99%.

Although Upstart does charge fees for loan origination and late payments, it has an A+ Better Business Bureau rating, and is rated higher than many other similar companies of the organization’s customer reviews. On average, Upstart customers save an estimated 24% interest compared to credit card rates.

LightStream

LightStream positions itself as an eager lender for those with good credit who have earned a lower interest rate and no-fee loans. The company’s loans range from $5,000 to $100,000, with interest rates as low as 5.95%. Repayment terms range from 2 to 7 years, and there are no origination fees.

LightStream is so confident you’ll love its service that it offers to send $100 to any customer who is not completely satisfied.This might be because of unique options it offers customers, such as same-day funding and planting a tree with every loan serviced. While this is not the company for anyone with low or no credit, the interest rates available to those with a great credit score are the lowest among our reviewed companies for debt consolidation loans.

Lightstream is the national online consumer lending division of SunTrust Bank.

LendingClub

Debt consolidation loans through LendingClub offer interest rates as low as 10.68% and run as high as 35.89%. Borrows can take out loans ranging from $1,000 to $40,000 and agree to pay back their loans over a period of 36 to 60 months. LendingClub borrowers typically have a credit score above 600 and several years of credit history. Upon signing the loan contract, the majority of LendingClub users receive funds within four days.

While LendingClub is rated highly among its customers, it works slightly differently than traditional lenders. In fact, LendingClub is merely a marketplace, not a lender. LendingClub offers what is known as peer-to-peer or marketplace lending. Once you submit an online loan application, LendingClub shares that information with its network of financers. At this point, lenders compete to service your loan, and you are provided with important information about groups willing to approve your loan, such as interest rates and loan terms. Since LendingClub does not actually service loans, it’s important that you research the actual lender you choose before signing a contract.

Although LendingClub may be a well liked service, it’s not for everyone. LendingClub only offers unsecured loans. However, this also means that if you don’t have a cosigner, you don’t have to put up personal assets to back your loan, like you would with a payday loan. Unlike some other debt consolidation loan services, LendingClub does charge administrative and late fees.

SoFi

With no initial fee requirements and no late fees, Sofi makes getting a loan simpler for people who don’t have money to spare. Allowing some people to borrow as much as $100,000, SoFi provides long terms lasting 2 to 7 years and offers interest rates as low as 5.99%. SoFi also provides unemployment protection, so that users can temporarily pause their payments while unemployed. Additionally, SoFi offers access to live customer support 24/7.

Approved borrowers with SoFi rate the company highly. However, this is not the company for those with low credit scores, as the minimum credit score for SoFi is nearly 700. Despite the requirement for good credit, SoFi members increase their FICO scores an average of 22 points after consolidating. Prospective borrows should also consider they may have to wait a while for their money to come in since in many cases, it has taken up to seven days for borrows to gain access to funds, far more than many other lenders.

Common Types of Debt

Credit Card

Credit cards are very easy to get, use and accumulate debt with. Most cards have high-interest rates and small minimum repayments causing the balance to grow quickly to the point where it can take decades to payoff.

The ease of use that credit cards allow coupled with the low minimum repayment amounts and high-interest rates create a credit situation that can easily spin out of control. Often the immediate solution to a maxed-out credit card is to apply for another. Ultimately the debt is so high that it seems that the minimum payments no longer address the balance owing.

It is important to find the correct solution when addressing credit card debt. Opting to address the debt on your own with a dedicated payment plan, attempting to negotiate interest relief, consolidating through a financial institution, or seeking a reputable organization to intervene on your behalf can be overwhelming. A poor decision could result in a larger than anticipated dollar cost, poor credit or unexpected legal impacts.

Reviewing alternatives with an accredited credit counselor can reduce the confusion and outline the positive and negative impacts of the different alternatives open to address credit card debt.

Payday Loan

Payday loans provide quick relief to a very stressful shortfall in cash flow. Beware of the costs and know that one payday loan often leads to several more.

The only stress worse than needing a payday loan is trying to find a way to pay it back. The fees and interest associated with payday lending are so high that borrowing money on one payday loan often leads to several other payday loans in an attempt to keep current.

The key is to stop the payday loan cycle. Seek help to create a manageable budget with an affordable repayment plan. It is usually best to seek the aid of a credit counseling agency that can intervene to consolidate and reduce the interest associated with these loans.

Student Loan

Student loans have become commonplace with rising post-secondary tuition fees many students can’t afford the price of education from their savings account alone. A common form of financing is a government-issued student loan. Although relatively easy to acquire with little or no credit history, repayment can be difficult upon graduation when confronted with an entry-level job and high cost of living.

While student loans have become common and the application process is well presented, the repayment process after graduation is rarely considered.  Low paying entry-level jobs, unexpected costs of living and changes in a family situation can make repayment very difficult.

Seeking advice from an expert to help manage other debts and work student loan repayment into the budget will help ensure that all obligations are met.

Car Finance

Car loans are appealing with enticing interest rates and low advertised payments.  Auto-loan contracts are very hard to break and can be hard to pay for.

It is very difficult to get out of a vehicle contract when a major financial issue occurs whether it is a job loss, divorce or other life events.  The situation is made more complex as people require their vehicles for work and as provincial laws vary around legal ramifications after repossession.

Repossession has a large impact on both credit and lifestyle.  Before making a decision to stop paying, allowing a voluntary repossession or not paying as agreed, it is wise to know what the long term impact will be.  Seek advice from an independent credit counseling agency before taking action.

Mortgage

Mortgages help people achieve the dream of buying a home. Second Mortgages and Home Owners Lines of Credit can be a trap.

While a mortgage is generally required to but a home, a Home Equity Lines of Credit (HELOC) often prevents people from paying off the loan. Many people use this type of credit to consolidate debt and take advantage of low interest rates and small repayment requirements. On many HELOC’s the payment requirement is just the interest. The principal never gets repaid and the loan lasts forever. Worse yet people continue to spend on their credit card doubling the financial damage.

Second mortgages are often used by individuals whose credit is impaired. The poor credit score results in high interest rates that inflate the overall cost of housing and reduces the amount of money available for other item in the budget. This will drive people to use other types of credit to maintain lifestyle. This erodes the equity they have built in their home while increasing debt load.

Consolidating debt using home equity can be a solution but requires broader plan to limit the use of additional credit and repay the consolidated debt. If there is no plan in place consolidating debt against a house will have limited success and greatly diminish equity in the asset over time.

Before using a mortgage to consolidate debt, seek advice on other alternatives that might provide credit relief and not risk the home equity.

What Types of Debt Should You Avoid

If the debt won’t bring you future income or wealth but rather funds your current lifestyle, it’s bad debt.

Payday loans: The most prominent example of bad debt is payday loans. These are usually small-dollar loans, under $500, that are due at your next payday. Fees are significant, typically ranging to $10 to $30 for every $100 borrowed. That can mean an annual percentage rate of just under 400%. This is some of the most expensive debt in the U.S., which is why some states regulate or prohibit these loans.

Credit cards: While the APR for credit card pales in comparison to payday loans, the 12% to 30% rates are nothing to scoff at. Credit card debt, especially when taken on for nonessential purchases, is undoubtedly bad debt. Making only minimum payments with a 22% APR credit card, $500 in credit card debt would take over four years and almost $280 in interest to pay off.

Auto loans: You may need a car to get to work, but the type of car you choose to buy can make an auto loan a grey area for the debt –- or straight-up bad debt. New cars depreciate as soon as you drive them off the lot, which could result in being underwater on your loan. And paying interest for years on an asset that is continually falling in value is harmful for your financial future. If you can’t afford to pay cash for your car, choose well maintained used vehicles that won’t see the same decline in value as their new counterparts.

In general, bad debt is any debt that is looking to exploit our desire for instant gratification. You should always try to avoid debt for consumer goods and entertainment or with high-interest rates.

Getting Out of Debt

Getting out of debt is a long process, you CAN start today, here are just a few ideas of things you could do,

1. Cut up a credit card
2. Post something you own for sale
3. Write down a goal to earn more money
4. Submit an application to a new (higher paying or additional) job
5. Transfer a high-interest rate balance
6. Confront your debt (write down your total debt and debt ratio)
7. Reexamine your budget
8. Make an extra debt payment
9. Look into credit counseling

If you follow the step closely, you should see results in no time. You will watch your debt level reduce and you can better manage your debt.