People get in debt for all sorts of reasons. Believe it or not, not all “debts” are considered “bad.” There are some “good” debts out there. If your credit report is suffering due to you going overboard with credit cards and loans, then a strategy on “how to get out of bad debt” is for you.
“Good” debts refer to those the money and financing you’ve borrowed to make investments in cash-producing assets. This debt is considered “good” because you are using the borrowed money to make even more money in the long run, just as long as you are wise with your investments.
There are tax-related debts that are bad because of the power the tax authorities (especially the IRS) have. Suppose you can prove that you absolutely cannot pay all the current taxes and back taxes you owe and have good debt relief/negotiation representation. In that case, you might be able to work something out with the IRS. They might give you more time to repay.
Regardless of whom you owe and how much you owe, there are a few different strategies to get out of bad debt. The “Snowball” method, for instance, involves the prioritization of paying off the smallest debts first, no matter what the interest rate is. You’ll need to have a spreadsheet of all of your debts listed in order of the outstanding balance, from smallest to largest.
How to Get Out of Bad Debt With a Spreadsheet
Starting at the top of the spreadsheet, those smallest balances should be the ones you pay extra money on each month while paying just the minimum payment on all the other debts below. One at a time, going down, you’ll start to get them paid off. The Snowball method might not be for you. It does have its cons. It’s slow for one thing, and it might not be wise for you to let that high interest rate on the larger debts keep on going, as you might end up paying more in the long run.
When learning how to get out of bad debt, you’ll likely come across the Debt Avalanche method. This method is the opposite of the Snowball method. It involves zeroing in on your highest interest rate debt(s) first while paying the minimum payment each month on the other debts.
This article is just a quick overview of a couple of your options. Another strategy might be better for you depending on your specific situation.
Suppose you are in so much debt that you are not confident you will ever be able to recover. In that case, you might want to consult with a debt relief company such as CuraDebt. They will help you learn how to get out of bad debt and offer any assistance you need.