Paying off Debt in 9 Steps pt 3

October 29th, 2009 | 401k, Bankruptcy, Debt, Money, Personal Finance

moneyfake Part three in the series on paying off debt: There is a solution to your problems with debt. These 9 steps will have you paying debt off in no time.

6 - Hunt down a good home equity loan. If you own your very own home and you have accumulated equity throughout the years as you have made payments on your mortgage, then now is a good time for you to consider taking out a HEL or Home Equity Line of Credit for the largest possible amount. This HEL will actually give you two different ways that you can save. First and foremost, you can use the proceeds of the loan in order to pay your debt down, trading a large loan such as an 18% loan for something much smaller such as a 6% or 7% loan. Second, if you happen to itemize your deductions when it comes to income tax returns, the interest for your HEL is actually commonly an item that you can deduct. The biggest deal is to make sure that you do not run up new debt before you pay off the HEL, after paying off your credit cards. Do not pay your credit cards off just so you can run them up again!

7 - Consider borrowing money out of your 401(k) account. If you participate in such a retirement plan at your work, then there is likely going to be a feature attached that allows you to borrow as much as 50 percent of the value of the account, or a total of $50,000 depending on whichever one is smaller. The interest rates tend to be just about a point or so above the prime, and this makes them cheaper than what you will find on most credit card accounts. This is a good option to consider when it comes to debt repayment, just make sure that you put the money back in your 401(k) account when you can, because you need it for your retirement!

8 - Renegotiate with your lenders. Once you have done all that you can, you are going to want to renegotiate the terms of your debt with the people that want you to repay it. This is an option that comes before bankruptcy, so give it a shot. The worst thing that is going to happen is that they will say no.

9 - Finally, if you have tried absolutely everything else but cannot pay down your debt, then bankruptcy might be the option. This is the absolute last possible resort to consider however, so do not jump to it until you are absolutely sure that you are in dire straights. Talk to a credit counselor before to make this decision because it is a serious one. Once you file bankruptcy, it will stick with you for a long time - And you do not want to make this decision if there was another way out.

Photo Credits: ZeroOne

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