Has your debt started to spiral out of control? Perhaps your student loans are due for payment, or you lost your job and your credit card accounts got out of hand? When you’re faced with a pile of debt, it can not only make the cost of living less affordable, but it can lead to an insane amount of stress. It may seem impossible to make a dent when you owe thousands or tens of thousands of dollars. But there are effective solutions that have been proven to help reduce your debts to a manageable amount.
Reevaluate Your Personal Spending
The first place to start when paying down debt is your personal spending habits. Although you may have a budget that clearly outlines how your earnings are to be divided up between bills and savings, you’ll need to take it a step further.
Review your current expenses. Divide them into categories of things you need and things you want. For example, rent and groceries are necessities while cell phones and subscription services are things you want.
Also Read: Which Budgeting Methods Are Right For You?
Next, take the list of things you could live without and see which expenses you can completely eliminate. An example might be to cancel your magazine and newspaper subscriptions for several months, or for good.
Of the remaining items on your list of wants, look for ways to save money. If you want television, internet, and phone services, for instance, you could do comparison shopping comparing the overall cost and quality of service from brands like Suddenlink. You may find that it is cheaper to switch providers or bundle services.
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Based on the number of expenses you eliminated and the ways you’ve found to reduce costs, how much money have you saved? Whatever the amount is, apply this number to paying down your debts.
Connect with Debt Collectors
It can seem natural to start ignoring the calls from creditors when you owe a large amount of debt. However, this can only work to your disadvantage. It sends the message that you don’t care about your obligation to repay. All it will do is result in more adverse collection practices. It is best instead to connect with your creditors and find a solution to knocking down balances faster.
Also Read: How Long Do Collections Stay on Your Credit Report?
Start by getting the contact information for all creditors currently listed on your credit report. Before contacting them, jot down information such as the amount due, the age of the account, and the current interest rate or attached fees. Then, reach out to your creditor and explain your current financial circumstances.
What many consumers are unaware of is that creditors just want to get paid and are often willing to work with you to reduce the debt. Coming forward allows them to offer you various payment arrangements or programs for customers with past due accounts. You’ll be pleased to find that some will lower interest rates, remove late fees, and even set up more convenient payment arrangements to get you back on track.
Another option would be to ask about a settlement offer. When debts have been outstanding for some time, creditors just want to recuperate as much of the costs they can. They will sometimes adjust the amount due by removing certain penalties and fees to come up with a ballpark amount that is a lot less than what was originally owed.
Borrow the Money
While not advisable for all, there are some consumers who are dealing with a lot of debt that can benefit from borrowing the money. If approved for products like a debt consolidation loan, low balance transfer credit card, retirement loan, or home equity loan, you can take the approved amount and use this to pay off all other debts. This would clean up your credit history, and give you one loan to repay with a smaller monthly payment that your previous debts combined. It would obviously be important to make sure that you’re able to repay the new loan or financial product back in full to avoid the risk of falling further into debt.
Though some debt is normal, too much debt can consume every aspect of your life. If you’ve been struggling with paying down a serious amount of debt, it is imperative to execute a plan of action that will help you to get them down to a manageable amount.
Start by reviewing your personal spending to find extra savings to put towards your debts. Then, work with your creditors to find an affordable solution to resolve the account. This, in turn, will put you one step closer to achieving debt-free living.
