Get You Finances In Order
How to reduce debt yourself
If you are going through debt related hardship and considering some form of debt relief, there are many options to help you. There are many agencies that may be able to provide debt reduction. However, with proper planning and a little awareness, you can take care of your debt yourself and avoid paying consolidation companies and debt counselors.
These are the following steps to consider when you have decided to handle your debts yourself.
1. Evaluate your debts: Collect all your financial documents and your credit reports to evaluate your financial situation. As before you start paying, you must know where you stand. For this assessment you may prepare a chart that clearly shows your balances, interest rates and other dues towards your creditors. You should have an accurate view of how much debt you are in, so you must keep track of your finances.
2. Check your budget: Check your monthly earnings and reduce essential payments (like rent, groceries etc) from it. After the deduction, see if you have enough left to pay minimum amounts towards your debts. Look for ways to reduce expenses. If you still don’t have enough left then try to increase your income.
3. Plan your way out of debt: After you have completely analyzed your financial position, make a list of the debts for which you pay the highest interest. Start paying as much as you can towards the debt for which you pay the highest rate of interest. Continue till the debt is paid off. Do not ignore the other debts, pay their minimum amounts. In this way, you can pay off the highest interest debt early and you will have more money to put towards the other debts. This helps in debt reduction.
4. Start negotiations: Don’t stop communicating with your creditors. Ask them if they can improve the terms on your debt. You may be able to get reduced rates of interests. The creditor may also agree to settle for a reduced amount of the actual outstanding balance. Tell them your situation and ask for their co-operation, they will usually be willing to help.
5. Meet with a bankruptcy attorney: Sometimes you can pay all of your debts. You should meet with some bankruptcy attorneys (free consults) and see what you qualify for. People often look at bankruptcy in a negative way. However, bankruptcy is a legal tool used to remove debt. Paying 700-1200 in bankruptcy fees to remove thousands of dollars in debt is something you should consider especially if you want to save money for retirement.
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