Accumulating debt isn't hard to do! Americans are swamped with offers from credit card issuers. Consumers are tempted by promises of no-interest credit, zero down, and "90 days same as cash!" Using credit to pay for the things we want is as simple as the swipe of a card or wave of your keychain. These gimmicks make accumulating debt almost inevitable, but typically with a concomitant adverse effect - high interest!



When debt accumulates, the interest paid for it by the American consumer sharply increases. You can get buried in your debt as bills pile up more and more, and you must seek a solution. So what strategy should you use to reduce your debt in the best way possible? Is bankruptcy the only viable alternative, or maybe professional counsel could be helpful?

Bills and more bills! Your bills keep rising, and there's no relief in sight. What can you do to curb your ever increasing debts? The prime strategy is a deceptively simple one: stop. Stop charging, stop spending, stop borrowing. Don't amass any more debt. Stop, then try some of these tactics for paring down or erasing the debt you already have.

Request assistance from a friend or family member:

Some people might have a kind friend or family member who can support them when it comes to paying off the money they owe. But, this plan can harm your relationship with someone who lends you money. Asking a person who is dear to you to loan you money can ruin your relationship. A lot of people feel that their appetite is not the same if they have to sit at the same dinner table on Thanksgiving Holiday with someone they owe money to. Use caution if you make this choice! A choice that is somewhat better (since it doesn't go against the initial rule about not taking a loan for extra money) would be if you could get the money from someone else to finish paying your debt. Watch out, however, since this can still be hard on a relationship.

Credit Counseling:

There are many companies that offer credit counseling services, including some non-profit organizations. While credit counseling can be a good way to reduce your debt, you should be careful when selecting a company. Make sure to ask questions, compare rates, and ensure that you're choosing a company that actually has been successful in reducing others' debts.

Debt Snowball

A debt snowball is based on the idea of paying off one debt at a time. Usually, it is best to begin by listing your debts from smallest to largest. If your smallest debt is $100 to a credit card company with a monthly minimum payment of $10, you can find extra money in your budget to pay off the additional $90 you owe on this debt. Once this debt is paid, you can focus on your next smallest debt, perhaps $250 owed to another credit card company. If the minimum monthly payment for this debt is $25, you can now pay $25 plus the $10 from the debt you already paid off; that's $35 a month towards this debt. As you pay off each debt, the payments from that debt, plus payments from each debt you have already paid off, are added together to pay off the next debt on your list. There are some drawbacks to this method of debt reduction. First of all, you must have money set aside for emergencies. This allows you to handle emergencies without borrowing more money. Second, you must be willing to sacrifice some ?wants? to put extra money towards the debt that is next on your list. If you can commit to this debt reduction strategy, you can work your way out of debt.

Debt Settlement:

Debt settlement is negotiating a lower payoff with the company you owe money to. If you have already missed numerous payments, a company may be willing to settle for less money than you owe them. There are companies that help you reach debt settlements, but you have to shop around before choosing a company. Some companies will counsel you to stop paying for an even longer time, to make the company you owe more willing to settle. This strategy can further damage your credit score. Some companies will also charge extremely high fees, so you may not end up saving money at all.

Debt Consolidation Loan:

A loan that consolidates all your outstanding debts can be a useful tool to improve your financial condition. If you own your home, consider a loan that uses your equity in the house as collateral. This gives you access to funds that are tied up in your real estate, and puts them to work reducing other obligations. Remember though that defaulting on this type of loan puts your home at risk, so plan carefully. And, take a good look at what you're rolling into the new loan. If rates on any of your existing obligations are lower than the rate on the consolidation loan, leave those lower-rate debts out of the new package; it's not cost-effective to include them.

Bankruptcy:

Just considering Bankruptcy will cause a cold feeling to go up someone's back. Typically done as a last resort, bankruptcy consists of having debts discharged since you can't repay them. On October 2005, new laws started that made it harder to apply for bankruptcy. It is necessary that obtain expert counsel, like a bankruptcy lawyer, before going this route.

There are many debt reduction strategies that may help you reduce your debt. Following any of these plans to get out of debt will likely be difficult. As you wade through the options that are facing you, be sure to ask questions; you always want to fully understand the process you are beginning. Are there any fees I will have to pay? How will this decision affect my credit rating? You have to carefully consider each option so that you do not end ruining your credit score, or even worse, paying more for a service than you are actually saving. If someone is promising you a service, be sure to get that promise in writing before signing a contract. Doing research, asking questions and making sure you fully understand whatever debt reduction strategy you choose can build a solid foundation for your road to freedom from debt.