Tips On How To Lower Your Debt

The steps on this page will lead you through the necessary steps to become debt-free and stay that way.

Make a budget: spend less, and save more. Creating a budget is an important first step to building sound money management skills. It is an estimate of income and expenses over a period of time.Sit down and make an account of all your income and expenses. First, list all your income. Next, list each of your fixed expenses, the ones that dont differ from month to month. Those may include your rent or mortgage payment, your auto loan payment, and your utilities if youre on a budget plan to pay for them. Next, add in necessary expenses and payments on bills that vary from month to month. Finally, list all your daily and regular expenses for entertainment, transportation ECT. Your goal is to develop a budget that lets you meet all of your monthly fixed expenses, and figure out where you can cut expenses to start paying down your credit card and other debt.

Cut all your non-essential expenses: Non-essential expenses include most of the things we don't need, and most often includes many items where we waste money the most. It includes spending on clothing, books, movies, magazines, video games, dining out, gifts, snacks, candy, shoes, etc.

Make a list of creditors: with name, address, phone number, credit card number, expiration date, and security code. Pull out all current statements and make a list. Write down the balance owed, interest rate, current minimum payments. Find out if the interest rates are fixed or variable, it will be worth the effort as those variable rates will need closer monitoring. Communication is one of your best tools to help you through difficult financial times. Your creditors would really prefer NOT to take stronger measures to collect the money that you owe them. After all, it costs them more money to refer your debt out to a collection agency. As soon as you know that youre having trouble making ends meet, call your creditors and explain the situation. In most cases, theyll be happy to work out a modified payment plan that will make it easier for you to meet monthly expenses. It may mean extending the period of your loan, or renegotiating the terms of a loan agreement, but in the short run, it will take the heat off and in the long run, it will save your credit rating.

Lower the interest rate: By transferring balances on credit cards, you can time and again pay an average of 4%. One thing to look out for is transfer fees: make sure that the fee isnt greater than the interest you would save.

Pay down your highest interest loans: While its generally not a good strategy to pay only the minimum payment on credit cards and revolving loans and lines of credit, there is one exception. If you have one or two high interest outstanding loans, one of the better ways to get control of your debt is to eliminate them as quickly as possible. By meeting the minimum payments on other debts for a few months, you can concentrate on bringing the balance down on your most expensive loans.

As hard as it may seem to dig your self out of a mountain of old loans, it is possible. To alleviate and ultimately lower your debt that you've picked up, you must be disciplined. But it is even more crucial to design a plan that you can actually follow.

by: shaun

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