Feeling overwhelmed by debt and unsure how to escape it? There are many organizations that can assist you. Are you the kind of person who enjoys handling things on your own and exploring options as you go along? Well, you’re in luck!
In this guide, we’ll show you how to create and implement your own debt repayment plan. The following steps will help you pay off your debts:
Track Down Your Debts
Start by listing out the variety of debts you owe and track the total and the monthly payments for each.
Continue to keep a detailed list of each debt as you pay them down. By keeping a handy list, you can keep each debt top-of-mind, which serves as motivation and helps with strategy.
Use One of the Two Classic Methods to Tackle Debt
For those trying to figure out the right debt repayment strategy, two popular options include:
- Avalanche debt payoff method
- Snowball debt payoff method
The first step is to make the minimum payments on your debts, regardless of the strategy you choose. Otherwise, your credit will suffer.
By paying off your debts in avalanche fashion, you prioritize paying off your debts with the highest interest rates first. After paying off the largest debt, you apply the money you no longer have to the highest interest rate to the second-highest debt. Pay off your debt by following this pattern.
Saving on interest is a major benefit of this method. Due to the lengthy nature of debt repayment, you may find yourself losing motivation as you pay off that first debt, but don’t lose hope!
In contrast, with the snowball method, you pay according to the balance. A major difference between the snowball and avalanche methods is that you start with the smallest amount and work your way up.
While snowball debt allows you to enjoy wins sooner, it costs you more potential interest over time.
Don’t Accumulate More Debt
While you are paying off your debt, freeze your credit card accounts. This helps prevent the accumulation of more debt. The recommendation here is to freeze credit and not close credit.
Depending on the limit on a particular credit card and your total outstanding balance, closing a card could negatively affect your credit score. A great way to prevent debt accumulation is to freeze credit cards.
Think of Additional Income
Check if your current job offers growth opportunities for earning more money. You may be able to negotiate a pay raise or bonus if you have been a valuable employee, either by saving money or making more money, making things more efficient, or reducing stress on your team.
Side hustles are a great way to earn extra cash without spending too much time on them. Tutoring, pet sitting, ride-sharing, and freelance writing are some of the ways to make extra money.
Any extra money you receive should be applied to your debt. Money can come from raises, bonuses, side hustles, as well as cash gifts.
Order a Credit Report
As you work through your debts, you should keep an eye on your credit. Your credit report should also be checked to see if your personal information, payment history, and debt amounts are accurate.
Any unpaid debts that have been sent to a collection agency may show up on your credit report. You’ll be able to see which agency the debts have gone to, and contact information may be listed for your review.
Monitor Your Credit
You can monitor your credit as you pay off your debt to see how your debt-payoff efforts are improving your credit score. Paying off debts and lowering your balances will generally raise your credit score.
There are a handful of free credit monitoring services that allow the monitoring of credit. There are many websites that offer free credit scores. Your credit score can also be checked on a variety of popular money management apps and credit card companies.
Make sure your credit reports are accurate to ensure you are paying your bills on time and having balances. In order to maximize insight into your credit, you can stagger receiving your free credit reports throughout the year from each of the three credit bureaus.
Contact Your Creditors
Get a repayment schedule in place with your lenders, and possibly negotiate for a lower interest rate or a lower repayment amount.
Having a sufficient amount of information on hand is a good idea before making a call. You may have to make several phone calls before you reach an agreement, and it usually takes more than one. This is a viable option, though, and well worth the patience.
Negotiate With the Collection Agencies
Creating a payment plan for debts that have been assigned to collection agencies will require you to make direct contact with the agency. A proposal is also something you will want to be prepared for. The lender may be prepared to accept less than the original amount owed, given that their goal is to clear the debt.
Debt Settlement During The Recession
There’s also another option to help negotiate with collection agencies. You can strategize your debt settlement through a debt relief expert like Alleviate Financial.
While there are several types of debt settlement programs, there are also a variety of credit counseling programs and opportunities to build a debt management plan around your specific financial picture.
Consulting with debt settlement services can help provide a solution to overcoming expensive credit card debt. And while there are a variety of debt relief programs out there, Alleviate Financial can help with strategizing around credit card debt before it becomes a more serious problem.
Schedule your debt relief consultation with our debt specialists today!
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