If you’ve ever been dealt a significant financial blow such as losing your job or unexpected health care costs, it can be easy to go deep into debt. When you have a large amount of debt, you may feel like there’s no way you’ll be able to get back out of it again. However, that’s just not the case. If you’re struggling with debt, here are some helpful ways to get it under control again
1. Know Where You Stand
It’s nearly impossible to get complete control of your debt until you know where you stand. Once you know what your entire debt situation looks like you’ll be in a better position to come up with a viable plan for tackling it.
First, gather all of the documents related to your debt and outline where it is coming from. Is it in the form of credit card debt? Student loans? Your home mortgage? When you’re doing your assessment, make sure you know exactly how much money you owe to each debtor, your interest rates and due dates. This information will be useful as you work through the next steps.
Next, you’ll want to create a budget. Take an honest look at how much money you bring in versus how much money needs to go out. You may need to establish different financial priorities for a while, meaning that you’ll do without “luxuries” such as your daily latte and going out to dinner with friends.
2. Consider the Debt Snowball Method
Financial guru Dave Ramsey suggests the snowball method as an effective way for people to get out of debt more quickly. This method concentrates on paying off the smallest debts first. Paying the smallest debts first allows us, as humans, to feel like we’re accomplishing our goal more quickly with small victories rather than having to wait potentially years to pay off our first balance. This helps keep us in it for the long-run.
Once your smallest debt is paid off, you work on your next smallest debt. You’ll then put the money you were paying toward the old, paid-off debt, toward that new debt. You’ll also continue to pay the minimum payment on all your other debts. Repeat this process until all of your debt is paid off.
3. Negotiate with Your Creditors
Even if you’re practicing techniques like the debt snowball method, you still might want to speak to your creditors for a couple of reasons. First, if you’re several months behind on your payments you might be able to garner a more favorable repayment plan by speaking with them over the telephone. That may include, lowering your interest rates, balance due or simply more achievable minimum monthly payments. Using this technique along with the debt snowball can help get you quickly moving on the right path. You’ll could end up paying less money while aggressively paying off your debt at the same time.
4. Consolidate Your Debt
For some, the thought of having eight to 10 separate payments to make each month can feel a bit overwhelming. It takes a lot of time to work through the budgeting and repayment of that. One way to make the process easier is to consolidate your debt. Instead of 10 or more separate payments each month, you’ll might be able to consolidate them all into one, or a few. Not only will this make it easier to manage all of your debt, you might also be able to consolidate some of your higher interest rate debts into an account with a lower interest rate, lower your total minimum monthly payment due, or even extend the amount of time you have to pay it all off.
5. Other Options
If you are so far behind on your payment that you’re on the verge of being sued by your creditors, you might want to also look into additional debt relief options.
There are consumer credit counseling and other debt management services available. These organizations are accustomed to dealing with people with significant debt challenges. Oftentimes they’ll work directly with your creditors on your behalf to get your debt reduced. You’ll typically send one monthly payment to them and they’ll distribute your payments to each creditor accordingly.
Another option is bankruptcy. Although, bankruptcy is usually a last resort option, it could be the best option for your situation. Just keep in mind that your student loans and certain other debts such as child support and alimony might not be dischargeable through bankruptcy.
Debt help comes in many forms. For some, the debt snowball is the perfect answer. For others, debt relief may only come once bankruptcy is filed. Regardless of what method you choose, it’s important to know where you stand financially. This allows you to make the best decision regarding your debts and to choose the plan that’s best for you.
About the Author
Wesley LeFebvre is a personal finance writer and content publisher who enjoys helping people find the best deals on financial products and services. He has personally struggled with significant debt issues and currently maintains an excellent credit score. He cares deeply about helping others who struggle with debt. You can read more from him and others at APRfinder.com.