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Choosing the Most Effective Strategy for Eliminating Personal Debt

Updated on May 16, 2017

Choosing a strategy for eliminating your debt and restoring your financial health is an effective milestone toward getting your life back in order.

However, you are not alone when it comes to the debt trap. According to Slate: United States of Debt, “the average household that has credit card debt owes $16, 000. That number is higher for other types of debt, for example:

  • $27,000 for auto loans
  • $48,000 for school loans
  • $169,000 for mortgages

What can the average household do to escape such crippling debt trap? An individual in debt can choose between two strategies besides bankruptcy. One is risky and can further damage your credit. The other is a more noble approach but requires a strong set of personal qualities to implement.

The Risky Approach to Eliminating debt

Many people choose to elicit help from a debt management service, instead of filing for bankruptcy. They believe that the decision to go with such program is the answer to their financial worries. However, as many have found out, their credit worthiness also takes a hit.

How does it work

When you go with a debt management plan, you give a certified credit counselor permission to pay your bills to creditors. What happens is that you pay a monthly lump sum of money to the debt management service and each creditor is paid an agreed-upon amount toward your owed debt. “It takes approximately 36-60 months to pay debts through a debt management plan,” according to the National Foundation for credit counseling.

The credit advisor usually negotiates with creditors to eliminate the interest and late fees. However, because you are paying only a reduced monthly payment to your debtors, the state of your credit is further damaged.

In addition, if you miss or is unable to make a payment to the debt management service, your creditors cannot get paid. As a result, they will most likely abandon the agreement, leaving you with the responsibility of paying the debt in its entirety.

It is because of such complications that going with a debt management plan should be your last resort.

Making the Right Debt Management Choice

Which strategy is right for you?

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The Noble Approach to Eliminating Debt

Eliminating excessive debt on your own is a noble feat because it takes going against the temptation to quit when you must make multiple self-directed sacrifices to stay the course.

To be successful in paying off all your debts you must be committed and consistent. Communication, negotiation and organizational skills are also vitally important. Without the ability to hang in there when the going gets tough you will most likely fail to pay off your bills and fall further into the abyss of debt.

You must contact each creditor and negotiate payments, especially if you cannot qualify for a consolidation loan. Your creditors will usually work with you if they sense your sincerity and urgency about eliminating debt. “Your goal is to gain your creditors’ cooperation in your difficult time,” according to the Credit Counseling Society.

In addition, you need to create a monthly schedule for repaying each bill. Such a schedule will help you stay committed and consistent in meeting your monthly payment goals on time. The more determined you are to eliminate your debt, the quicker you can get back to living a quality lifestyle.

Eliminate Unnecessary Spending

The sacrifices you must make to manage your debt involves eliminating unnecessary spending in every feasible way imaginable. Consider eliminating the following activities:

  • End weekly Restaurant outings-buying food and cooking it at home is way cheaper
  • Avoid buying expensive clothing-you don’t need name to wear name brand clothing to look good.
  • Reduce monthly smart phone bills-eliminate unnecessary apps
  • Get rid of cable TV for a while-use your computer to catch up on the latest TV program.
  • Move into a smaller apartment or home, if possible
  • Cut transportation cost-catch the city bus or carpool as much as possible

Making these sacrifices can be extremely tough, especially if they are habits and routines that have impacted you for nearly a lifetime. However, if you are determined to effectively manage your debt you must commit to making sacrifices of convenience. Eliminating unnecessary spending is a major part of becoming debt free.

Attempting to Escape debt without a reliable plan is an unorganized way of creating even more chaos in your life and affairs. However, an effective strategy will go a long way in helping you to free yourself from the burden of debt and get your life back in order.

Kirk, Chris. "Five Charts that Show America's Debt Crisis." Slate: The United States of Debt. 2017, Slate, n.d. Web.

“How to Communicate with Creditors and Communication Agencies.” Credit Counseling Society. Web. 16 May 2017


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      Shey Saints 9 months ago from Philippines

      i love your article. this is helpful