Reducing Your Debt – 5 Helpful Tips

If your debts are getting hard to manage or you are ready to start working on repaying your debts, then recognizing the options that can help will make it easier to get started. Debt reduction can take many forms and you have several options available that will work around any situation, even if you have missed a payment on loans or credit cards. You can reduce debt if you know the options that are available to help you get started.

Talk to the Creditor

Although you can use a negotiation service to talk to your creditors, it is also possible to negotiate with lenders on your own. You should always explain your situation and see what options are available through the creditor.

When you negotiate with a creditor, you should first organize your information. Write down the information about the creditor on the account, how much you owe, the interest rate on the debt and your payment history on the loan. When you have the information available, it is easier to discuss the situation with the creditor.

Negotiation can take a few possible forms. You can ask the creditor to reduce your interest rate, set up a new payment plan with lower payments or ask if the creditor is willing to take a lump sum and settle the debt. The best option will depend on your situation, but if you choose to ask for a settlement, then you should arrange the funds beforehand or set up the payment date for a time in the future so that you can gather the full amount of funds before the due date.

Make Use of Balance Transfer Credit Cards

If you have high interest credit cards and your credit has not been damaged by your debts, then you might qualify for a balance transfer credit card. A balance transfer credit card will usually offer a low introductory rate. In some cases, the rate is as low as zero percent.

By using a balance transfer card, you are dramatically reducing the amount of interest you will pay on the card. Although this can give you some breathing room and allow you to gradually work off the debt, you should always note the date that the promotional period ends. The interest rate will increase after the introductory period is complete.

A debt reduction plan that incorporates the very low interest rates of a balance transfer card will make it easier to work on paying the debt off slowly. Instead of paying into a high interest account, you are making monthly payments that are directly impacting your debts.

Consolidate the Debts

When you are trying to reduce debt, it helps if you have a limited number of bills to pay. Consolidation helps improve your debt reduction plan in two ways. It reduces the interest rate on your debts and the funds are used to pay off several other debts. As a result, you have only one bill instead of several bills.

You can consolidate your debts personally with a home equity loan, which is often a low-interest loan, or you can use a consolidation loan from a lending institution. Using a home to secure the loan will have some possible risks, but only if you are unable to make the monthly payments.

Seek Professional Help

If you are struggling to reduce debt on your own, then a credit counseling company might be the right option for your needs. Credit counseling will offer services to negotiate with your creditors, create a personalized budget and get you started on a debt repayment plan.

Although you will pay a fee for the services, it can provide you with tools to avoid getting into difficult situations with your debt in the future. By getting help to create a realistic budget and repayment plan, you will have the tools to keep repaying your debts after getting some help.

You should always use caution and take time to research a company thoroughly before signing up for any services. The best companies will help you create a personalized plan and will offer educational programs to teach you different ways to reduce debt and maintain your financial goals after you pay off your debts.

Obtain a Bankruptcy

When debt reduction options are becoming difficult and you are finding that the debts continue to grow, it might be time to consider a bankruptcy. Although bankruptcy is usually used when you have exhausted other financial tools, it can help if your situation has gotten out of control and you do not see any other options.

The way bankruptcy works is by clearing certain financial obligations. The unsecured debts are cleared and you are no longer responsible to repay the loans. This can give you the financial relief you need to get back on track.
Although bankruptcy can help in certain situations, it should only be used if you have missed payments and are in default. If you are still able to make payments, then other debt reduction solutions will be a better fit for your needs.

Bankruptcy will show on your credit history report for 10 years and will have a dramatic impact on your credit score. While the impact is dramatic, you can rebuild your credit score after the process is completed by taking on a secured credit card and using caution when you use the new credit.

A bankruptcy does not clear every debt, so you should consider the debts that are creating financial challenges before filing. A bankruptcy will not clear any secured debts or student loans. If the debts you are struggling with relate to a property, then you should sell the property or negotiate with the creditor to gain some relief. If you are struggling with student loans, then you should contact the lender and request a new payment plan. Student loans have many helpful options when the amount is too high to manage.

At, we know that debts can grow and become out of control at unexpected times. Fortunately, it is possible to get help and reduce your debts with the right tools and programs.

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