2 Ways to Get Out of Debt

Nowadays it seems as if almost everybody is looking for ways to get out of debt.

Most people are drowning in credit card debt and it seems like it was a lot easier to get into debt than it is to get out of it. Here are two ways to get out of debt that can help put you on the right path to living debt free and beginning to accumulate wealth for yourself instead of the credit card companies.

1. Get a Home Equity Loan

Getting a home equity loan may be a great way for your to pay off your high interest rate credit card debt for a payment with a much lower interest rate. You need to do your homework, though. While it sounds like it may be a no-brainer, you don’t want to find yourself in worse financial shape.

Equity in your home is the difference between what you owe on your mortgage and the current value of your home. As the value of your house rises and you make more mortgage payments, the equity in your home rises as well.

When you take a home equity loan to pay off credit cards, unlike with home improvements, you don’t have anything to show for it except now you have a higher mortgage payment. While paying off 18% interest rate credit cards and replacing it with a 7% home equity loan will save you a lot of money in the long run, you don’t have anything tangible for the money. So, for one thing, you need to be very careful that you don’t fall back into the same habits and start racking up credit card debt again.

Secondly, since you didn’t use the home equity loan for things like home improvements that could increase the value of your home, you could find yourself owing more on your home than it is worth. This could happen if the value of your home decreases after you take your loan because the housing market slumps. Or maybe they raise taxes where you live and people don’t want to move there.

2. Make A Budget

You must include this with getting a home equity loan. Spending more than you make is what got you in trouble with your credit cards in the first place. If you don’t fix that by having a budget, you’ll end up racking up more credit card debt and you won’t be able to get a home equity loan to pay them off because you won’t have any equity in your home.

While either one of these steps can help you get out of debt, they are much more effective when you can combine these two ways to get out of debt [http://www.mydebtconsolidationtips.com/ways-to-get-out-of-debt.html]

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