What's the best way to get out of debt?
Posted
Jun 26 2008, 08:42 AM
by
Karen Datko
This post comes from Linsey Knerl at partner blog Wise Bread.
Debt is the hottest topic on personal-finance blogs around the world. Why? I would venture to guess it's because so many people are drowning in it.
The unfortunate truth is that few people care to read about debt until it has already had a negative effect on their financial situation. This can make the final solution to their debt problems even more difficult to hear about.
I'm no stranger to debt. I had been managing school loans, vehicle loans and a few small credit card payments since I was 19, and I was successful in keeping a clean credit record. Then a few poor life choices left me responsible for more than $30,000 in credit card debt at age 24. With nothing tangible or memorable to show for my efforts, I could have become bitter. Maybe I could have filed for bankruptcy. (This was before the law changed considerably.)
Ultimately, however, I chose to consolidate, reduce the rate, and pay those debts off early.
Why am I telling you this? Two reasons: It lends credibility to my view on debt and repayment, and to keep you from throwing things at me when you read the following paragraphs.
The No. 1 question I hear from people in debt is not: "What's the best way to pay this off?"
It is usually: "How do I get out of this debt?"
Note that in their wording, they are usually implying that they want to get out of their debt obligation, though not necessarily pay it off. Google searches for popular debt-related terms bring up scads of results for help with "getting out of debt" -- all of which seem to give a quick and easy way out. A few clicks and some reading will tell you, however, that the schemes are all the same, and repayment is almost always involved.
So my answer to the question of "What is the best way to get out of debt?" is simple: whatever way is quickest, easiest and costs you the least amount of money, and is at the same time perfectly legal and moral.
What you shouldn't do
Ditching your financial obligations by having a cousin co-sign while you walk away is not the best way. Making a conscious decision to default when you could be paying something (anything) is not the best way. Looking for answers from the sky about how not to have to repay a debt (when you could if you wanted to) is not the best way.
I am saying this with the full understanding that someone reading this will have a unique situation that warrants blowing off a loan. I will guarantee that a handful of others will insist that they had no choice. I am, therefore, not talking to you, specifically.
The $30,000 in debt I repaid gave me zero benefit. It was the product of putting my name on a few accounts that were taken advantage of in the most grievous of ways. It would have been easy to say, "It wasn't my debt," default and start over seven years later, instead of taking almost six to pay it all back. For this reason, I am speaking to the majority of those suffering from excessive debt who may not feel the benefit of their spending, realized they spent more than they could truly afford, or who simply got the short end of the debt stick. A loan is a loan, and it's almost always best to pay it back. Period.
I realize that if everyone paid back their loans, small claims courts would shut down, and debt collectors would lose jobs. Search engine optimization would change dramatically, and books on finance would lose their place on the best seller lists.
However, there will always be those who won't pay up.
But for the rest of us, there is one answer to the debt problem: Make payments -- no matter how small. As painful as it feels right now, no amount of money can buy the integrity and honor of making good on a loan.
Other articles of interest from Linsey Knerl:
The best toys aren't toys at all
Stretch those pennies with watered-down cooking
Buying cheap sneaks: Your kids get what you pay for
