What is Debt Elimination?
The process of debt elimination involves reducing all of your loan balances to zero. By paying them off, you no longer have to make interest payments - money that you’ll never get back.
To visualize and see examples of debt elimination, get an understanding of amortization. Amortization happens when you knock out debts by paying principal and interest over time.
Why Pursue Debt Elimination?
An instructor once asked me 'what is the cost of money?' In other words, how do you buy money? The answer: you pay more money.
Debt gives you access to money, but you have to return that money plus interest and fees. It may make sense to borrow. For example, many people cannot pay cash for a home, automobile, or college education. In some cases, debt opens doors.
When debt is weighing you down, it’s time to pursue debt elimination. If your debts are costing you more than you can afford, and ruining your chances of a secure financial future, you need to start a debt elimination program.
Debt Elimination Tactics
You may be able to accomplish debt elimination in a variety of ways. The best debt elimination programs are ones that you take charge of yourself:
- Practice frugal living
- Create a budget, and include debt elimination in the budget
- Use the snowball technique
- Work more or earn more
- Request loan modifications
- Investigate credit counseling options
- Consider debt consolidation programs
