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Debt is a significant concern for many people, and with good reason: American households hold a whopping $12.96 trillion of debt as of the end of 2017.

The challenge of reducing debt can seem overwhelming.

However, there is light at the end of the tunnel, whether you have $500 or $50,000 in debt. By prioritizing debt reduction as a necessity in your life, you can start addressing it aggressively.

Reducing Debt Basics

Paying off Debt

The first step to take in paying off your debt is figuring out just how much you owe. What is your current balance, and what is your interest rate? Look at your minimum payment, and you’ll see that it probably doesn’t go very far in reducing your balance. Look at your household budget and see where you can save some extra money to increase your debt payments. Every little bit cuts accumulating interest.

As ever-rising debt statistics show, it is growing harder for consumers to get out of debt, in part due to rising interest rates. Credit is meant to allow consumers increased purchasing power, but when that power is far out of sync with a person’s actual finances, it’s almost impossible to escape that debt without hitting the proverbial – or literal – jackpot.

Debt Relief Strategies

You still have to live while paying off debts, so it’s important to devise a realistic strategy. What are your living expenses each month, and how much can you pay towards your debt? Is there breathing room in the former that may allow you to expedite the latter? While prioritizing debt payments is essential, you also don’t want to leave yourself with less than 40% of what you make to use on a regular basis. If you need to keep putting groceries on a credit card because you’re making your debt payments, you’re not making any progress.

If you’re concerned that making payments won’t be enough to get you out of debt, there are more aggressive ways to help.

Consider Debt Consolidation Options

Debt consolidation helps you to relieve your burden by combining all accounts into one payment. Typically, you’ll be taking loans with higher interest rates and combining them into one lower interest account. There are two primary ways of consolidating debt. One is by using a 0% balance-transfer card, paying off all debts with this card, and then paying off the card’s balance during the low-interest promotion period. The other is by taking out a fixed-rate loan with lower interest than your other accounts, paying off that debt, and then focus on paying off the one loan according to its terms.

Why Debt Settlement Could Be A Mistake

Debt settlement is often the last resort for those who cannot qualify for bankruptcy. Consumers work with a debt settlement company and make their payments to a single account rather than to creditors. The debt settlement company then works with creditors to get them to accept a lower amount and to convince them to leave the consumer alone.

It sounds like a relatively simple fix, but in reality, you are the one who stands to lose the most. When you stop paying your bills, even though they’re going to a separate account, your creditors can pursue you through collections agencies, additional fees, and even through legal action. You’ll also see repercussions on your credit report and score, and you may not settle your debt for months or years.

Protect Yourself From Debt Relief Fraud

The debt relief industry continues to grow with American’s debt, but unfortunately, that means so does the risk of scams and fraud. The Federal Trade Commission (FTC) alerts consumers that fraudulent companies will promise debt relief, charge consumers a hefty upfront fee, and then don’t or can’t follow through. For someone already in debt, this can be devastating. Because of this, debt relief companies must adhere to an FTC rule that says they cannot charge consumers any fees before the debt has been resolved, and companies must provide disclosures about the process and their services.

Credit Card Debt

In their January 2018 report, the Federal Reserve reports that Americans hold a whopping $13.16 billion in credit card debt. The problem with this debt is that most card issuers charge high-interest rates – with the average over 16%, any balance can quickly snowball into unmanageability.

Experts agree that wiping out credit card debt should be a priority when you are looking to get your finances under control. If you only make the minimum payments each month, accumulating interest will make it even harder to do so. Instead, try and pay off your card in full every month, so you aren’t paying a premium with interest. Any time you get a big windfall, like a tax refund or a gift, put that towards your credit card debt.

Debt and Your Credit

When you’re working towards reducing your debt, you should also focus on improving your credit. Good credit will help you get lower rates in the future, and you may even be able to refinance some of your loans with better terms. If your score is within the 500-600 range, you’ll be restricted from most offers of credit, and you’ll pay more for any you do have. For scores between 600-700, you’ll qualify for certain cards and loans, but you’ll still be paying higher rates. Once your score is between 700-800, you’ll find better interest rates on loans and even better insurance rates for your car, and when you hit 800, you’ll be offered prime rates and the best terms available.