Debt Elimination

You've probably heard that people with high blood pressure should eliminate salt from their diets. Well, the same concept (sort of ) applies to your finances. If you have a high amount of debt, you should eliminate it from your finances. Both of these things are easier said than done, but there are ways to make debt elimination easier.

Debt Elimination Programs

Often it's hard to cook without salt, but in this day and age, there are plenty of salt substitutes, and cooking with spices often adds flavor. Just as there are plenty of salt substitutes, there are plenty of debt elimination programs available. This industry has cropped up in the last ten years, and has helped hundreds of thousands of people get rid of their debt. Here's a brief description of some of the different types of debt elimination programs available:

Debt Consolidation - This is the most popular form of debt elimination, probably because of the fact that it can help almost anyone in almost any credit situation. The process involves a debt management company contacting your creditors to try to get your balances reduced and your interest rates lowered. The may even be able to get past fees (like late fees and nuisance fees removed, if those apply to you). Because of the reduced interest rates, you can be out of debt in about five years.

Debt Consolidation Loans - Because this involves a loan, and that involves collateral, this option isn't as popular. However, it's still a good debt elimination tool. What happens is a lender gives you a loan to pay off your unsecured debts. You pay the loan back at a much lower interest rate than what you were paying your creditors, so you can again be out of debt in about five years.

Debt Consolidation Mortgages - These allow you to borrow from the equity in your house to pay off your unsecured debts. The loan amount is added to your house payment. Because it's tied in to your mortgage payment, it will be paid off in the same amount of time as your house. Be careful with this kind of debt elimination tool. First, you have to see if there are closing costs involved. If there are, those may cancel out the benefit of having the loan. Second, if you think you can't make the new mortgage payment you'll have, don't do it. If you miss payments, you could lose your most important financial asset--your house.

Student Loan Debt Consolidation - If you have a lot of student loans and student loan debt, student loan debt consolidation can combine the loans into one and get you a much lower fixed interest rate. (Most student loans are variable rate, so your payment could go up.) This tool cuts your monthly payment amount by nearly 50% because it stretches your payments out over as long as 30 years, if necessary.

Debt Settlement - This debt elimination tool allows you to pay off your debt at 30-50 cents on the dollar, but you often have to have access to enough cash to pay that new, reduced balance off all at once, or over the course of a year. If you're lucky, you might find a debt management program that will let you pay that amount off over three years. The effect this tool has on your credit score is still a grey area, so it's not quite as popular as the other tools.

No matter which debt elimination program you choose, you should try to stop using your credit cards and incurring other unsecured debt while you're paying off your existing debt. After all, how do you expect to be able to get rid of your debt if you keep getting more?

If you enroll in a credit counseling program while you're enrolled in a debt elimination program, the counselors can help you learn to do this by teaching you how to use credit wisely and how to budget, among other things.

To figure out which debt elimination program is right for you, search the Internet to find a debt management company.

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