If you’ve ever been dealt a significant financial blow like losing your job suddenly, you know how frustrating debt can be. When you have large amounts of debt, you may feel like there’s no help big enough to allow you to move past your debt. However, that is not the case. If you’re struggling with debt and are tired of talking to bill collectors, here are some significant ways you can get control your debt.
Know Where You Stand
It’s nearly impossible to get control of your debt until you know where you stand. Once you know what your debt situation looks like, you’ll be in a better position to come up with a viable plan to control your debt.
First, you need to assess what your debt looks like, according to Bankrate.com. Is it in the form of credit card debt? Student loans? Your mortgage? When you’re doing your assessment, make sure you know exactly how much money you owe to each debtor. 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” like your daily coffee-to-go or you’ll skip going out to dinner with friends for a couple of months.
Many people hate to set up budgets, but really this is the best way to get control of your finances, especially if you’ve reached the stage where creditors are calling you. You’ll know exactly how much you can afford to give to each organization/ company you have debt with.
Try the Debt Snowball Method
Financial guru Dave Ramsey suggests that once people make a budget that they get out of debt by practicing the debt snowball method. A debt snowball concentrates on paying off your debt rapidly. Once you list all your debt, pay off the smallest debt on your list in full. Pay the minimum on your other debts at the same time. Ramsey recommends this because it appeals to human nature: More specifically, people will be motivated to pay off their debts if they have a couple of small victories first.
Once your smallest debt is paid off, you work on your next debt. You’ll 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.
Negotiate With Your Creditors
Even if you’re practicing techniques like the debt snowball, you’ll still want to visit with your creditors for a couple of reasons. First, if you’re several months behind on your payments, you might be able to garner favor with them by speaking to them directly and telling them about your debt payoff plans.
Second, you may also wind up getting better interest rates or a lower payment by talking to your creditors, according to Life Hacker. Using this technique in addition to practicing the debt snowball can provide you with some significant debt help. You’ll be paying less money and be aggressively paying off your debt at the same time.
Consolidate Your Debt
for some, the thought of having eight to 10 separate payments to make each month can feel overwhelming. it takes a lot of time to work through the budgeting of that. one way you can significantly get some help with all those payments is to consolidate your debt. Instead of 10 (or more) payments each month, you’ll have one payment.
The beauty of this plan, aside from its simplicity, is that it works well with other debt-reduction tactics like the debt snowball. You might even get a second job, which will allow you to pay more against your debt.
Granted, sometimes the steps above may not help you. You might have too much debt or be so far behind in your payment that you’re on the verge of being sued by your creditors. You do still have options even if this is the case.
If your town has an organization like Consumer Credit Counseling or some other debt reduction service, check that organization out. These organizations are accustomed to dealing with some significant debt challenges. They can usually get your payments reduced. They also deal directly with your creditors. You pay them one payment each month until your debts are paid completely off.
However, some debt is so overwhelming that bankruptcy winds up being your best option.
If you feel you must file bankruptcy, you’ll want to look at a couple of things. Go back to your budget and take a look at your debts again. Debts like student loans are not usually dischargeable through bankruptcy. You’ll want to keep that in mind as you work through your bankruptcy plan.
Additionally, you must decide what kind of bankruptcy you want to file, Chapter Seven or Chapter Thirteen. Chapter Seven is often the simplest in that once the courts review your case and your creditors have a chance to weigh in, your debts are discharged in full.
On the other hand, filing Chapter Thirteen means that you’ll be paying off your debt for a while (for three to five years) but at reduced payments. The advantage of getting this kind of debt help is that it allows you to get current on payments. It also allows a court-appointed trustee to act on your behalf with creditors. It additionally allows you to avoid events like foreclosure, and it doesn’t remain on your credit report as long as Chapter Seven does. (Chapter Seven remains on your credit for 10 years; Chapter Thirteen for seven.)
Debt help comes in many forms. For some, the debt snowball is the perfect answer. For others, debt relief may only come once the 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 to control your debts and to choose the repayment and/ or debt discharge plan that’s best for you.