Do it yourself Debt consolidation, Settlement and Debt Management
One of the better ways to get out of debt is to go for self-evaluation and explore how you can do it yourself. If you can analyze your financial situation, you'll have better control over your money and enjoy a debt free life. This article will help you fix your debt problems without any professional help. All you need is to follow the do it yourself steps to debt settlement, consolidation and management.
Do it yourself debt settlement
When you're unable to pay the minimum on your credit cards/bills due to sudden financial hardship, debt settlement may be the right choice for you. It's worth considering when the only other way out of debt is to file bankruptcy. This will help reduce your debt balance by 40%-60% of the outstanding amount.
Usually the debts to settle first are those having higher rates of interest. When you settle such debts, it makes a lot of difference in your monthly budget. Check out the do it yourself steps to debt settlement and understand how best you can negotiate with your creditors.
Do it yourself debt consolidation
If you're looking to reduce the interest you pay to creditors and invest less towards debt payment, do it yourself debt consolidation may be a smart choice. Herein, you can negotiate with your creditors and reduce the interest rates on your debts. Follow the steps to do it yourself debt consolidation as given below.
- Priority debts: Prepare a list of your debts (with creditors) and arrange them in the order of priority.
- Calculate Affordability: Make a list of your income including wages, child tax credit, child tax benefit, working tax credit, state benefits etc. Then calculate how much you can afford to pay per month on all debts.
- How to contact creditors: Decide whom to pay first and call up those creditors to find out if they still hold the debt or they have sold off your debt to a collection agency (CA). Know how to contact creditors/CAs.
In case the creditor/CA contacts you first, you can stop them from further contact if the SOL expires. This can be done by sending them an SOL letter. - Debt validation: If your debt is turned over to a collection agency, you should ask them to validate the debt before you start paying. Use the debt validation letter to send your request.
- Negotiate with creditors/CAs: You need to negotiate with your creditors/CAs so as to lower the rates and hence reduce the payment on high interest debts. Use sample letters to negotiate with the creditors/CAs.
Make sure your total monthly debt payment doesn't exceed what you can afford. While you get a reduced rate, you can also negotiate to waive off any late fees. - How to consolidate credit cards: If you have multiple credit cards with small debt amount on each, you can consolidate them through balance transfer. This is done by transferring balances on other cards to the one having a low rate or 0% interest rate. So, you can make a single payment instead of multiple payments on all cards and pay much less in interest.
However, prior to balance transfer, look through the terms of the 0% card and see if it has a reasonable introductory period. This is because if the introductory period is quite long, you'll have enough time to pay off the entire balance at 0% rate. Also, check for any balance transfer fee that your creditor may charge. Avoid canceling any credit card or applying for new cards. Know how credit card debt consolidation can work for you.
Do it yourself debt management
When you fail to manage your debts along with your daily expenses, it's time you take steps to organize your finances. This can be done by way of do it yourself debt management wherein you use the Snowball method of debt repayment. Take a look at the steps given below.
- Check out the creditors' statements and find out how much you owe on your debts.
- Use the Unsecured debt Calculator to find out the total outstanding balance on your unsecured debts.
- Prepare a list of your income from all sources.
- Develop a monthly budget to keep track of your expenses. Use the budget worksheet and check out a few budgeting tips.
- Find out how much you can pay each month on your debts.
- Decide which account you'll pay off first. Choose the one with the highest interest rate or that which has the lowest balance.
- Apply the minimum payment and some extra money to the first debt you've chosen to pay off.
- While you make payment on the first debt, keep paying the minimum on others.
- When the first account is paid off, add the same amount to the minimum payment of the next account.
- Repeat steps 6 to 9 for all your accounts till you're debt free.
However, if you're not comfortable with planning a budget, you may take help from a credit counseling agency. A certified credit counselor will develop a realistic budget based upon your financial situation. This is to ensure that you can pay off debts and improve your financial situation. To find a credit counselor, contact any of the organizations such as, AADMO and AICCA.
Do you need professional help?
In case you don't feel comfortable negotiating with your creditors, you can seek professional help. Avail a free debt counseling session with a debt consultant in our community. The consultant will help you decide whether to opt for debt consolidation program or debt settlement.
Alternatively, if you have contacted a credit counseling agency for debt help, you may be offered a debt management plan to help pay off debt faster.
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