One of the best ways to get out of debt is to do it yourself. If you can analyze your financial situation, you'll have better control over your money while enjoying a debt-free life. This article shows you how to fix your debt problems without any professional help. All you need to do is to follow these do-it-yourself steps to debt settlement, consolidation, and management.
Do it yourself debt settlement
If you're unable to make the minimum payments on your bills due to a 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 outstanding balance.
Usually the debts you should settle first are those having the highest interest rates. Settling these bills makes a lot of difference to your monthly budget. Check out the do it yourself steps to debt settlement and learn how you can negotiate with your creditors. If you don't feel comfortable negotiating on your own, get help from a settlement company to negotiate with creditors or collection agencies on your behalf. Here's an interactive that explains how to negotiate and pay off debt with help from a settlement company.
Do it yourself debt consolidation
If you're looking to reduce the interest you pay to creditors, debt consolidation is the smart choice. Here, you negotiate with your creditors to reduce the interest rates on your debts. Follow these steps to do-it-yourself consolidation below.
- Priority debts: Prepare a list of your debts with the names of your creditors and arrange them in the order of priority.
- Calculate Affordability: Make a list of your income including wages and state benefits. Then calculate how much you can afford to pay per month on all your bills.
- How to contact creditors: Decide who to pay first and make sure those creditors still hold the debt or if they have sold your debt to a collection agency (CA). Find out how to contact creditors/CAs here.
- Debt validation: If your credit account has been turned over to a collection agency, you should ask them to validate the debt before you start paying. Use a debt validation letter to send your request.
- Negotiate with creditors/CAs: You need to negotiate with your creditors/CAs to lower your interest rates and reduce your payments on your high interest debts. Make sure your total monthly payment doesn't exceed what you can afford and negotiate to waive off any late fees. Use one of the sample letters available here in order to negotiate with the creditors/CAs.
- How to consolidate credit cards: If you have multiple credit cards with small balances, you can consolidate them with a balance transfer. This is done by transferring balances on other cards to one having a low or 0% interest rate. So you make a single payment instead of multiple payments and pay much less in interest.
- Prior to making a balance transfer, look at the terms and see if it has a reasonable introductory period. If the introductory period is quite long, you'll have enough time to pay off the entire balance at the introductory rate. Also, check for any balance transfer fees that your creditor might charge. Avoid canceling any credit cards or applying for new cards. Know how credit card consolidation can work for you.
Do it yourself debt management
If you fail to manage your bills along with your daily expenses, it's time to organize your finances. This can be done by yourself using the Snowball Method of debt repayment. Here are some steps you can follow to get out of debt:
- Find out how much you owe on your debts.
- Prepare a list of your income from all sources.
- Use the Unsecured Loan Calculator to find out the total outstanding balance on your unsecured loans.
- Develop a monthly budget to keep track of your expenses. Use the budget worksheet and check out these budgeting tips.
- Find out how much you can pay each month on your bills.
- Decide which account you'll pay off first. Choose the one with the highest interest rate or which has the lowest balance.
- Pay more than the minimum payment on the first debt you've chosen to pay off.
- While you pay on the first debt, keep paying the minimum on the others.
- When the first account is paid off, repeat steps 6-9 until all your bills have been paid.
If you're not comfortable planning a budget on your own, you can get help from a credit counseling agency. A certified credit counselor will develop a realistic budget based on your financial situation to ensure you can pay off bills and improve your financial situation. To find a credit counselor, contact an organization such as AADMO and AICCA.
Do you need professional help?
If you don't feel comfortable negotiating with your creditors, you can seek professional help. Enroll in a free counseling session with a debt consultant from our community. The consultant will help you decide whether to choose debt consolidation program or go for a settlement.
Alternatively, if you have contacted a credit counseling agency for debt help, you may be offered a debt management plan to help you pay off your bills faster.