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4 Things You Should Do if You are Deeply in Debt

It’s not uncommon to have some debt, as there actually is something called ‘good debt’, but if you feel like you are drowning in it, it may be time to reevaluate. It’s recommended to avoid having your debt-to-income levels go to 30 percent or higher. This includes every type of debt, from car payments to credit cards to mortgages. But it may be time to look to other options if that number jumps beyond 30 percent. Know that there is no single step that will get you out because it requires a combination of steps and lifestyle changes.

Consider a Personal Loan

Credit card debt often has extremely high interest rates, meaning you will want to prioritize this soonest. You won’t make progress toward your debt if all your income is going toward the interest instead of the actual balance. Using a personal loan can help you get rid of your balances, and you might get more favorable repayment terms on a personal loan. You can read over a guide with more information about using a personal loan to pay off your credit card debt.

Look to Credit Counseling

If you think you just need a little help to save money and pay off what you owe, credit counseling can be helpful. They may be able to negotiate with your lender for you. Many agencies are associated with the National Foundation for Credit Counseling. It is important make sure you work with one of these because other agencies may not be as reputable. There are a few ways to know if you should consider credit counseling. If you have reached your limit on a card, or you are missing payments, you might want to consider counseling. The same is true if stress about your debt has affected your mental or physical health.

Prioritize the Most Important Debt First

If you can’t pay off your debt and find yourself struggling from month to month, you should prioritize paying what you can, which should be the most important balances first. You may want to prioritize those secured by things like cars or houses, so you don’t lose that car or house. You might also want to prioritize the balances with the highest interest rates, so you don’t lose as much money on interest. No matter how you decide to go about it, this method usually means you will make the minimum payment on your other balances while paying as much as possible toward the ones you are prioritizing.

Talk to Each Lender

You can negotiate with your lenders yourself, even if you don’t use credit counseling. It’s common for credit card companies to offer hardship programs where you may be able to reduce your interest rate so you can pay more toward the principal, which will help you stay motivated. Of course, asking your lender or credit card company to help in this way is notifying them you are having problems paying, which means your credit limit might be reduced.

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