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How to get out of debt

Get out of debt
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Debt can be a scary subject, whether it’s finding out how much we really owe or burying our heads in the sand by simply repaying the minimum.

The truth is that a lot of us do not have our finances under control, whether it's a personal loan (opens in new tab) or credit card that we're struggling to pay each month, or, probably even more seriously, payday loans (opens in new tab) that you can't manage properly.  

Getting out of debt takes management, and the first step is understanding exactly what agreements you have entered into and the terms attached. By simply not paying creditors and missing payments, your credit report can become severely affected. This may stop you from getting credit in the future.

So what steps can you take to get yourself out of debt?

1. Know your data

First of all, gather all your paperwork and emails and go through exactly how much you owe, which bills are needed to pay and what your credit score says about you. Make sure your list includes things such as the name of the creditor, balance, minimum monthly payment and interest rate for each source of debt you have.

Top debt settlement provider

National Debt Relief is our top pick of debt settlement providers. As well as providing debt settlement, their debt councilors will also help you understand your debt management options.

2. Figure out your debt-to-income ratio

You can find out what your debt-to-income ratio is by making a list of all your debts and income, then dividing each other to come up with a percentage. Anything over 50% and you may not be eligible for further credit. Ensure you include any monthly items not included on credit reports; these could be family loans, medical bills, and even groceries and utilities.

Most importantly, know your monthly take-home pay. This is the figure you have to work with on how quickly you can get your debts paid off.

3. Prioritize your payments

If you have multiple debts such as credit cards, check to see which ones have the highest interest rates and pay those off first.

Depending on your credit rating, you may be eligible for a card or loan with a lower interest rate, to find out ensure you only apply using forms which don’t leave a mark on your credit file. These are called ‘soft searches’.

4. Pay more than the minimum

Stuck in the minimum rut? Overpay whenever you can to clear your debt faster and lower your debt-to-income ratio. Keeping checking those credit scores, you’ll soon see them go up. Just ensure there is no penalty for early repayment, and if so, take that into account in your overall bill. This is especially important for those looking to pay off credit card debt (opens in new tab).

5. Budget, budget, budget

Create a budget and a plan as to which debt you will pay off when and stick to it. If you feel you need help in delivering, then it may be best to turn to a professional agency to see if they can help you solve your debt in other ways such as credit counseling, debt consolidation, debt settlement or even bankruptcy. 

A professional will be able to help you come to that decision and take things further. If you have a small amount of debt then it is always worth talking directly to the creditor about managing your future repayments.

National Debt Relief

National Debt Relief is one of the best options for debt settlement. Customer service and debt negotiation are provided in-house, and its average rate of debt reduction is one of the highest we've found.

Gina Clarke has worked in journalism for over a decade for titles such as The Daily Mail, The Sun and Forbes. She began her career in BBC radio and now specialises in subjects such as financial technology and women’s health. She has written for the Top Ten Reviews brand on a number of different and varied topics.