Are you struggling to pay off loans or credit card debt? If so, you’re certainly not alone, as the vast majority of Americans are carrying some sort of debt. It’s not a problem that will go away on its own, and if you keep doing what you’re doing, interest charges will continue to accumulate.
There are professional services available that can help you manage your debt. Before you go that route, it’s important to evaluate your current options to see what other steps you can take.
Exhausting Other Debt-Reduction Strategies
Whenever possible, it’s smart to try to handle your debt on your own. Not only will you avoid paying any fees to a third party to help you get rid of your debt, but it will also teach you the skills you need to pay off debt and avoid it going forward. Self-help strategies for dealing with your debt include setting up a budget, consolidating your debt, and negotiating your debt with creditors.
Creating Your Budget
Regardless of whether you go the self-help route or seek professional help with your debt, you need to know how to make and follow a budget. Your budget includes all your monthly income and expenses. If you’re currently in debt, you should also add a set amount per month for paying down your debt. You’re far more likely to commit to paying that amount if you put it in writing.
Are your expenses too high to pay down your debt? That’s a sign that you need to either cut back on your spending or find a way to generate additional income.
Consolidating Your Debt
Are you making several payments every month to different creditors? It may be wise to either take out a loan to pay off all your debt, or transfer all your debt balances to a 0-percent APR credit card (the 0-percent APR is an introductory rate, so only do this if you’re confident in your ability to pay the debt off within that introductory time frame).
Debt consolidation has a few key benefits. You only have one monthly payment to make, which is easier to manage. You may be able to obtain a lower interest rate than you currently have. If you have any debts that could result in repossession of your property, such as a title loan, consolidation allows you to pay those debts off and get some breathing room.
You may just need to talk to your creditors to see what other options are available. They may let you settle your debts for a lower amount or extend your loan for a lower monthly payment. Sending your debt to collections or repossessing your property costs creditors time and money. They’d prefer if you’re able to pay it back, so you can often negotiate a deal with them that benefits both parties.
If you’re on the brink of bankruptcy or you’ve defaulted on multiple debts, it may be time to look into professional debt management. There are multiple services you can look into to help you improve your financial situation.
Debt Settlement Companies
This type of company negotiates with your creditors on your behalf to pay a lower settlement amount to resolve your debt. Avoid any debt settlement company that tries to charge you a fee before settling your debts. You should only pay after they get you results. These companies can be helpful because they know how to negotiate with creditors better than the average consumer, as long as you find one that isn’t a scam.
Credit counselors don’t work on your behalf like a debt settlement company, but they do provide you with valuable information on money management. The information they provide can help you improve your spending habits so you can pay off what you owe and then start saving your money.