Getting Yourself out of a Debt Hole

Many people don’t take their finances seriously when they are younger only to find that they have fallen into a challenging financial position and need to find help in getting out of their financial difficulty. This can be very challenging and earning your way out of your debt may not be the full and best solution to your problems. This article will provide some basic guidance for climbing out of a debt hole.


Begin by performing an overall assessment of your financial situation and make a list of your debt and the terms of your debt. Rank the debt in terms of how good or bad it is. Generally the interest rate is the main determinate with higher interest rates being worse, but other factors will also impact the ranking of debt. As an example, student debt cannot be eliminated through a bankruptcy which s a negative. Further, some loans may be guaranteed by family members and are worth repaying to relieve the burden on your loved ones. A full assessment should include both the quantitative and qualitative factors associated with your debt when you are considering how to classify it.

From here develop a plan to repaying your bad debt first and set aside the good debt by making only the minimal payments on this good debt. Consider the possibility of consolidating the debt into a large loan that may provide you with some relief in terms of the date that the loan repayments will start and may provide for a lower interest rate on your loans if the market rate is lower than the loans that you have outstanding. There are many factors that go into consolidating debt including your credit history and score so much consideration needs to be made when determining if this is the right option for your loans.


Next, develop a budget that you can use to track your spending in order to help you to plan out the financial payments that you will need to make in the future. Organizing a budget will help you to understand your expenses and identify potential areas where you can trim your expenses so that you can more easily repay your debt with the amounts that you save.

If you find yourself spending more than you are earning look for ways to earn additional money with a part-time or second job or lower your expenses in whatever way possible to meet your financial obligations.

Finally, look to see if there are assets that you can dispose of in order to use the proceeds collected to repay your debt. Taking this step can provide you with a significant amount of money that can help you to balance out your financial needs in a reasonable way that let you climb out of debt.