A Guide to Getting Out of Debt When You Feel Trapped

Debt isn’t fun—by any means. Ask anyone that operates a struggling business. Ask the US government. Ask a medical student or anyone still repaying student loans years after the fact. You need not look too far, as the odds are that you or someone you know is very familiar with debt.

However, of all the different types of debt out there. The worst of all has to be credit card and personal loan debt. This is why many consumers decide to utilize services that offer credit card debt relief.

Credit card debt really takes the cake on this one. As anyone that has previously dealt with the vicious cycle of trying to pay down revolving lines of credit or credit card debt knows, making even a modicum of progress on your debt obligations is by no means—an easy feat.

At times it can feel like it literally drains the life out of you. The process of actually getting rid of all your debt can become an extremely intensive and overwhelming process.

And for good reason.

Credit cards—by their very nature—are designed to keep you in debt, so that your creditors and banks continue to collect high interest payments throughout the process. This is their bread and butter!

Depending on your APR and balances, if you were to only make minimum payments on your cards, your payback and amortization period could range anywhere from 10-25 years. Meaning for a complete payoff of each individual credit card balance, you’ll like be paying for decades.

Also bear in mind, the above repayment period is factored and based on you never making any additional charges with the credit card again. If you still use the cards regularly, eliminating that balance can feel next to impossible.

Once you become trapped in this vicious cycle, the psychological impact it can have on your daily life can also feel devastating and has been known to ruin relationships with friends and family (especially if you try going to them for financial help).

For anyone currently feeling “stuck”, please understand that your current situation is only temporary and things will eventually get better.

If this is something you wish to tackle of your own accord—your foremost priority should be to setup a proper budget. Account for you monthly expenses and do a side by side with your monthly take home income.

If you don’t have time to put in the work or don’t think it’s something you will able to tackle on your own, there are other viable options you can take.

Debt Relief Companies & Programs

If you are currently one of the Americans that feels trapped in a vicious battle against revolving debt (don’t worry you are not alone), you have options. Often times your best bet may be to seek help by enrolling in a debt relief program.

Although, debt relief companies may sometimes get a bad reputation (due to a few bad apples in the debt relief industry), some organizations like “The Debt Relief Company” actually do the right thing by their customers.

So, exactly how do you decipher between the good debt relief companies and the bad ones?

It’s pretty simple really. First, make sure the debt relief program you are inquiring about does not have any upfront fees or hidden costs. As per the FTC guidelines on settling credit card debt, any legitimate and trust worthy debt relief company will never charge any advanced fees.

Some of the shady actors in the debt consolidation industry chose to disguise themselves as law firms in order to bypass this—since law firms are technically allowed to charge up-front fees—but do not be fooled.

Moreover, make sure to ask great questions and make sure the debt relief firm is not providing you with misguided and unrealistic expectations. Any company that promises to settle your debts for “pennies on the dollar” is usually lying through their teeth and shouldn’t be trusted. If the process was that easy, everyone would do it.

Finally, as with any debt relief or debt settlement option, you should expect to have negative consequences to your credit in the short term.

Good debt relief companies will pave a path for your success in the program early on and set realistic expectations—not mislead them into believing they are receiving a debt consolidation loan or that their program is too good to be true.

Great debt relief companies will have set tactics regarding how to avoid debt collection calls and make your transition into the debt relief program as seamless as possible.

Likewise, even companies that don’t charge up-front fees can be prone to providing subpar services. Some companies will drop clients if they receive a summons/litigation or settle smaller accounts first so that they can charge their fees first (even though it may inevitably lead to a client’s program becoming unsuccessful). The best debt relief programs will charge the lowest percentage of fees, get the best results for their client, have superb customer service and perform all the heavy lifting—so that all you really have to do is kick back and make your monthly payment. The right debt relief services could be the easiest and best path available to you if you are dealing with a significant amount of unsecured debt and don’t really have the confidence to tackle everything on your own. For those of you that are more DIY oriented continue reading below.

Tackling Credit Card Debt on Your Own

Going this route is definitely recommended for individuals that are self-disciplined, have smaller credit card balances, less aggressive creditors, and therefore a lower likelihood of receiving litigation on any one credit card account. Some consumers can also take advantage of balance transfer options but be careful as balance transfers have pitfalls and don't always provide a direct solution. Although, you may not have the years of expertise and financial know-how of a debt consolidation company, negotiating on your own credit card debt is not an insurmountable task—not by any means. Yes, there are definitely more associated risks with going this route since you are essentially shooting a basketball in the dark but if you do your homework—it could work out quite well.

Your first step should be to stop paying your creditors and minimum payments (the debt relief industry refers to this as a strategic default). Stopping your payments will bring your creditors to the negotiating table and show them that you mean business. Since the creditors do not want you to give up on paying them back they will be much more willing to negotiate with you. After this you will want to claim financial hardship and begin the back and forth negotiations with your creditors. Beware this is not an overnight process and will require an extensive amount of work on your behalf. Try to stick firm to your payback terms and get the best possible deal from your creditors as possible. Once you’ve reached an agreement with your creditors make sure to get the terms of settlement in writing and make timely payments on whatever term agreements you reached with them. If you do miss a payment by the set dates it could void the entire agreement setup with them, meaning your payments would be applied to back interest you owe and not towards the debt resolution agreement. For those interested in going this route feel free to research more on dealing with debt as per www.usa.gov guidelines.

Reducing Expenses

Regardless of what option you chose to move forward with, you really should aim to reduce your expenses and put aside monthly savings with both plans. Whether you’re saving a tremendous amount of each month via a debt relief program or increasing your cashflow by going the DIY debt negotiation route—putting money aside for a rainy day is always recommended! Sometimes we experience a change in income or unexpected expenses arise, when this occurs, we can’t continue to live with the same spending habits. We all have to adjust to our circumstances and learn to live within our means.

Increase Your Income

Apart from reducing your monthly expenses, you can also work on increasing your income. Whether, you do so by getting a second job or by generating passive income (definitely easier said than done!) it’s totally up to you. Regardless, sometimes generating some extra cashflow each month may greatly help your financial situation.

In conclusion, you should never be afraid to try doing things on your own or be afraid to ask questions about debt relief options and what they entail. Whether you choose to take things into your own hands or go with a trusted company to help is totally up to you. Both options are viable for paving a path towards your future success and financial freedom—it really just depends on you!