A new survey from Insider and Morning Consult polled 2,096 Americans about their financial health, debt, and earnings for a new series, “The State of Our Money.” Of those surveyed, 1,613 have paid back a loan or debt before. Here’s how they did it (note that respondents could select more than one option):
- 49.5% followed a payment plan
- 20.6% received financial help from friends and/or family
- 13% had loans forgiven by a creditor
- 11.5% declared bankruptcy
- 11.5% received a financial windfall, including inheritance, winning the lottery, and returns on investments
The results show the importance of taking charge when it comes to paying off debt. Nearly half of respondents took action and followed through with a strategy or payment plan, while the other half were able to repay their debt due to events one can’t particularly count on happening.
How to pay off debt when it feels like you can’t
To pay off debt fast, you should first list all sources of debt — such as credit-card debt, student loans, and a personal loan — along with the outstanding balance, interest rate, minimum payment, and payment due date, wrote Business Insider’s Tanza Loudenback.
Call your bank and ask for a lower interest rate. If you have credit-card debt, consider consolidating all your balances onto one card with a 0% introductory APR and paying off the balance within the promotional period. Then follow the debt avalanche method: Paying off the most expensive debt first (the one with the highest interest rate) so you can save money on interest.
If you don’t follow through with a payment plan and aren’t fortunate to receive a financial windfall, financial help, or have your loans forgiven, you may end up joining the 11% of respondents who declared bankruptcy.
While bankruptcy can “be a powerful and affordable way of eliminating debt,” attorney Simon Goldenberg of The Law Office of Simon Goldenberg, PLLC, previously told Business Insider, it’s not as simple as it seems.
Chapter 7 bankruptcy — liquidation bankruptcy for people with limited incomes, that aims to discharge all debt — involves more risk, attorney William Waldner of Midtown Bankruptcy previously told Business Insider. Chapter 13 bankruptcy is less risky but more involved — it involves a restructuring of debt, in which the debtor makes payments for three to five years, with the goal of getting the debt discharged at the end.
So bankruptcy may not wipe out the debt the way you think it will.