Americans owe close to $14 trillion (yes, trillion) in consumer debt. Is your debt contributing to this number?
From credit cards to car payments, it’s easy to feel as though you’re drowning in debt. The idea of getting out of debt might even seem impossible.
We’re here to tell you, though, that this is not the case. There’s always a way out, no matter how bad your situation is. Read on to learn how to get out of debt with no money and bad credit.
Know Where You Stand
You might know that you’re in a lot of debt, and you might know that your credit score is less-than-stellar. Do you know how much money you owe, though? Do you know what your credit score is right now?
When you’re in a bad place financially, assessing your situation might feel like the hardest thing in the world to do. If you don’t know where you stand, though, it’ll be almost impossible for you to get out of the hole in which you’re currently stuck.
The first step in your debt elimination plan should be getting a handle on your current finances. Go online and look at your bank statements. Find out how much you owe, down to the last penny, and take a look at your credit score (this is free to check through your bank or a third-party service).
Contact Your Lenders
Once you have this information readily available, try to whittle down some of your debts. One way to do this is by contacting your lenders directly. If you reach out to these people early on (before you can get hit with calls from a collections agency, for example), it’s easier to plead your case and negotiate with them.
When you talk to your lenders, you can find out if there’s a way to lower the interest on your loans, which can result in lower payments. You might also be able to set up a payment plan for your debt that better aligns with your current budget.
Look into Debt Consolidation
Another option to consider is working with a debt consolidation firm. If you’re serious about figuring out how to get out of debt, it’s definitely worth contacting these agencies. They can work with your lenders and creditors to put together a payment plan for you and lower the amount of money you have to pay overall.
Keep in mind, though, that there are some catches. For example, when you’re participating in a debt relief program like this, you cannot use credit cards or take out any loans. You also will have to pay a monthly fee in exchange for the debt counselor’s services.
Prioritize Your Debts
If you’re committed to taking a DIY approach, there are still plenty of ways to address the issue of how to get out of credit card debt (or any other type of consumer debt). The first step is to prioritize your debts. There are two primary ways to do this:
- Snowball method: This involves focusing on the smallest of your debts first; once you pay it off, you move on to the next largest one, and so on until everything is paid off
- Avalanche method: This involves focusing on the debt that has the highest interest rate; it makes a bigger dent in your total debt, but it can be more daunting than the snowball method
Both of these methods have their advantages. Consider which one makes more sense for you and tackle it head-on.
Create a Budget
At the same time that you’re prioritizing your debts, it’s also important to establish a budget for yourself. Now that you’ve gone through your finances, it’ll be easier for you to figure out how much you spend on things like rent, groceries, gas, and bills. Put together a budget using this information and stick to it.
Keep in mind that you’ll likely have to cut out some nonessentials when you do this. Take note of how often you’re eating out or making random runs to Target and try to decrease or eliminate these expenses altogether. You’ll be amazed at how much more money you have to work with after doing this.
Make Your Payments on Time
When you’re putting creating your budget, take note of when specific bills are due, too. Then, make sure you’re paying them on time every month. If you’re constantly making late payments, you’re going to end up getting hit with higher interest rates and late fees, and your credit score will continue to get lower as well.
Find Ways to Increase Your Income
Paying off debt and raising your credit score becomes easier when you increase the amount of money you have coming in each month. When your income is higher, you obviously have more money to work with and can make more headway toward reducing the amount you owe. It also makes it easier for you to apply for a bad credit loan or another type of loan in the future (while also increasing your chances of getting approved).
Look into side gigs like driving for Lyft or Uber. You might also want to go through your house or apartment and see if there are any items lying around that you can sell.
Don’t Give Up
Finally, don’t give up hope. At first, it might seem like you’re not making any progress toward your goal of eliminating debt. Play the long game, though, and remember that it takes time to see results.
You Know How to Get Out of Debt with No Money and Bad Credit: Now What?
You now know how to get out of debt with no money and bad credit. It’s not enough just to know what to do, though. You also have to do it.
Keep these tips in mind as you begin your journey toward becoming debt-free. It’ll take time, patience, and consistency. If you follow the steps laid out above, though, you’ll be on your way to a life free of consumer debt before you know it.
Do you want to learn more about budgeting and proper money management? If so, we have plenty of other helpful resources on our site. Check them out today.