How to Get Your Debt Under Control

Any amount of debt can be stressful and seem impossible to eliminate. Fortunately, there are many steps that can be taken to eliminate debt and regain control of your life. The first step one must take to get debt under control is to figure out exactly how much you owe and the specific stipulations for each debt (i.e. credit limits, policies regarding late payments, and interest rates). Once you have reviewed each debt in detail, you can then attempt to contact your creditors to negotiate a reduction of your debt and forgiveness for any late fees. (Note: negotiating a reduction of your debt will definitely make repaying creditors easier, but it can also negatively impact your credit score for a period of time). After you have negotiated with your creditors, you will then be ready to begin aggressively repaying your debts. The best method for accomplishing this is to attack the account with the highest interest rate first, and after that account is fully paid off, move on to the account with the next highest interest rate. To have the most success with this method, and to get out of debt faster, pay more than the minimum payment on the account with the highest interest rate while still paying the minimum on all other accounts. By following these steps, and avoiding incurring more debt, you can successfully get your debt under control, but if the thought of tackling your debt alone makes you uneasy or you feel that you have too many debts for this process to work, there are other options.

One option is a consolidation loan, which is a good choice for people who have multiple debts and find themselves spending the majority of their monthly income on debt payments. Consolidation loans are loans that are taken out to pay off all other debts that a person may have. The benefit of these loans is that after the money is used to pay all other creditors, you will only have one much lower monthly payment to make. Additionally, if you do your research and find a loan with an interest rate lower than the lowest interest rate of your debts and cease accruing debt on the accounts you pay off with the loan, consolidation loans can also save you money.

A second option is a consolidation plan which enables you to work with a company to restructure your debt. Consolidation plans differ from consolidation loans in that they do not require you to take on more debt since they are not loans, but similarly to consolidation loans, they help borrowers consolidate their debt payments into one monthly payment. The way this works is that the borrower ceases to directly deal with their creditors; instead a debt counseling company negotiates with the borrower’s lenders to reduce or eliminate their late fees and to lower their interest rates. After the negotiations are complete, the borrower sends one monthly payment to the debt counseling company which they then distribute to the borrower’s creditors.

Regardless of whether you decide to get your debt under control minus help or feel that a consolidation loan or consolidation plan is right for you, remember that these methods will only work if you work to reduce your monthly spending to avoid racking up more debt and diligently make your payments on time.

Sources:

Debt Control Solutions. essortment, 2011. Web. 17 May 2012 <http://www.essortment.com/debt-

control-solutions-18784.html>.

Get Your Debt Under Control: Reduce Your Variable Expenses. Money Funk, 2010. Web. 17 May 2012

<http://www.moneyfunk.net/finances/reduce-your-variable-expenses/>. 

Wilson, Scott J. How to Get Debt Under Control: Five Tips. Los Angeles Times, 04 Sep. 2011. Web. 17   
            May 2012 <http://articles.latimes.com/2011/sep/04/business/la-fi-five-debt-20110904>.