The bills are coming in fast and furiously now, or so it seems. You’re losing the handle on your obligations, and you need to do something about it – now. It’s all about money management, an area in which you lack focus. Well, keep reading, because here are steps to manage and reduce your debt more effectively.
Figure Out How Much You Owe
Break out the bills and bank statements because it’s time to calculate what your debt load is. List your totals, interest rates, and contact information for each account.
Look Over Your Credit Report
It’s also time to pull your credit report and see what your scoring is. This is especially important if you’re planning to seek a financial solution that depends on your credit standing. You also want to check for any mistakes that could be pulling your numbers down. You can get a free copy of your credit reports here.
Come to Grips with Your Spending
No financial remedy in the world will work in the long run if you’re still spending at levels that got you in trouble in the first place. So, you’re going to have to change some habits.
One way to do that is by establishing a monthly budget, which will also allow you to see what you’re spending your money on. Those fancy daily coffees? Yes, they add up. Save that money and put it toward your debts.
Try the Avalanche or Snowball Approach
There are two common ways to accelerate payments, which you should consider if you hope to pay off your debts. They are the Avalanche and Snowball methods.
With the Avalanche method, you’ll make minimum payments on your outstanding accounts, then use remaining cash to erase the debt that carries the highest interest rate. Once you do that, proceed to the account with the next-highest rate, while continuing to make minimum payments on the other credit cards or other accounts, until you are debt free. This debt-paying method will save you the most in terms of interest payments.
The Snowball approach is similar, but here you’ll erase your smallest debts first, then rinse and repeat until all your accounts are paid off. This usually works best for those who need early “wins” to motivate them to keep going.
If you can’t seem to make progress regarding debt reduction, and you’re having trouble managing all your monthly bills, with their varying payments, rates, and due dates, then consolidation may be the solution for you.
With debt consolidation, you merge your accounts into a single monthly payment, hopefully with a better rate. You likely can get a consolidation loan with poor credit, but a lower interest rate makes it worthwhile.
In addition to through a loan, you can consolidate via a zero-percent balance transfer card, which does require good credit. You’ll also need the ability to pay off your new card, onto which you’ll shift your high-interest debt before the promotional rate ends.
A home equity line loan is another consolidation possibility, and you can usually get one with a low rate. The proviso here is that your home is attached as collateral, meaning that, if you fail to make payments, your house could be lost to foreclosure.
Consider Debt Settlement
If your situation is too far gone – you’re way behind on multiple bills – and you hope to avoid a bankruptcy filing that could live on your credit report for up to a decade, then debt settlement may be the solution for you.
With this approach, you’ll hire an established, reputable company such as Freedom Debt Relief to go to your creditors to see whether they’d be amenable to accepting less than what you owe, in a one-time payment in full, to have your debts marked as “settled.” Learn more at www.freedomdebtrelief.com.
If you consider these steps to manage and reduce your debts more effectively, then employ the ones that suit you best, you can ultimately put yourself back on sound financial ground. And remember, if your financial circumstances are more acute, we recommend that you reach out to Freedom Debt Relief for a fresh start.