1) Know Your Starting Point
Without knowing exactly what you owe to every creditor you have, it’s difficult to create an accurate plan to reduce debt. Write down every debt and bill you have outstanding.
If you can, check your statements and write the interest rate you’re being charged by each company on the outstanding balance.
2) Income
Below your list of outstanding debts, write down any income that comes into your household each week or month. When most people see these numbers written down in black and white it’s easy to determine whether credit is eating away your earnings.
If there’s not much left of your income after deducting your credit card and loan repayments then it’s time to get rid of that debt!
3) Negotiate For Lower Rate
If banks didn’t have your business they’d go out of business. Take a look at the interest charges you’re paying each month. It’s crazy how much of your income is taken away by interest fees.
Call your creditors and ask for a lower rate on your existing credit cards or loans. They may initially refuse, but stand firm and explain that you might be forced to refinance your debts to another lender. They’d rather negotiate and drop your rates than see you leave. You could save yourself a lot of money in the process.
4) No More Credit!
Applying for more credit while you’re trying to repair your credit will only make things worse for you. Banks look at your total debt amounts, so any more credit will only reduce your credit score further. It’s also important to stop charging more items on your existing credit. Stop using credit while you’re in credit repair mode.
5) Payment Plan
Call your creditors and discuss the option of a payment plan to help catch up any past due payments you owe. Make sure the payment options you work out are realistic for your budget so you don’t miss any payments. Where possible, try to make your repayment plan so that each new amount is due every time you receive a pay check. It’s easier for you to budget this way.
6) New Habits Not Bad Habits
In order to reduce the debts you have now you need to look closely at your spending habits. They got you into this trouble in the first place, so obviously what you were doing before isn’t working for you. Don’t keep doing what you’ve always done. Create new spending habits, watch your budget and be more careful about your spending so you can avoid getting back into the same financial trouble again in the future.
7) Professional Help
Unfortunately if you’re trying to reduce debt quickly, you may have already reached a critical point in your financial outlook that can’t be fixed easily. If this sounds like you perhaps it’s time to seek professional help.
Seek out a professional credit counselor who is registered with the BBB and work with them to create a realistic budget to help get you out of your credit mess.
Never be embarrassed to ask for help. Hold your chin high and always be proud to say that you’re taking responsibility to reduce your level of debt.
