The best debt reduction strategies will take into account three primary goals:
- Stopping new debt accumulation
- Reducing debt
- Eventually eliminating debt altogether
Ideally, this would be accomplished while also trying to minimize damage to your overall credit rating. However, even if your credit score is damaged, it isn’t impossible to restore it—you just need to follow a plan to pay off your debt and get back on track.
Being in debt is an increasingly growing problem. Creditors have made it too easy for consumers to get in over their heads. And, given the poor economy, many Americans are suffering under the stress of excessive debt compounded by high unemployment rates and other factors.
If you have too much debt, you’re not alone. Don’t despair or give up though, because there are plenty of things you can do to start to take control and create a plan to get out of debt.
Here are some of the best debt reduction strategies to follow.
Professional Debt Help
If you are in over your head, one of the best things you can do is to seek the help of a professional financial advisor for debt advice. There are debt management companies and credit counselors who will assess your situation, and recommend a plan and course of action that will get you back on the right track.
Many debt help companies will deal directly with your creditors for you, so you don’t have to deal with any more embarrassing phone calls from collectors.
Your entire debt can be completely eliminated within a few years, as long as you follow the repayment plan.
You need to start debt reduction strategies by finding every possible way to reduce your debt. First and foremost—stop adding to your debt in the first place. Don’t open new credit cards you don’t need, and close accounts as soon as you pay them down.
Transfer low balances to another card so that you can close more accounts. The less potential you have for accumulating new debt, the better off you will be.
Cut up all your credit cards, and call the banks to close the accounts. You will feel empowered just by taking this first step on the road to debt recovery.
Make sure you aren’t paying high interest rates when you don’t have to. Carefully check your credit card statements to make sure you are aware of the interest rate you’re paying.
Do a little research and find a low interest balance transfer offer. Then move all high balance cards to a lower interest rate card. This can save you a ton of money in the long run.
Be sure you cut up the credit cards and remember to close the accounts so you won’t be tempted to spend more on credit. Also, interest rates for bank loans, auto loans, and mortgages have dropped recently.
Consult with your bank, or do some research on-line to see if refinancing other loans won’t reduce your overall debt.
On a home loan, typically even a small drop of 1-2% in interest can result in hundreds of dollars of savings—and you can take that extra money each month and pay down the balances of remaining debt, like credit cards.
Pay as Much as You Can
While you may be living paycheck to paycheck, do try to pay more than the minimum balance due, if at all possible. Also, try to pay one extra mortgage payment each year, by paying your mortgage by half every two weeks, or just adding one/twelfth of the additional amount onto each monthly payment.
These simple debt reduction strategies can really add up.
Take a close look at your budget, and see if there isn’t something in your life that you are willing to cut back on a little bit, like premium cable TV channels, or newspaper and magazine subscriptions—then take that small amount of extra money and apply it to paying down your debt.
Remember, the best debt reduction strategies will stop increasing debt, pay down your current debt, and put you back on track to eliminate your debt completely.
You simply need to sit down and make a plan and budget, and you will see exactly what needs to be done to get out of debt once and for all.
If you are really in over your head, or you lack discipline, then seek professional debt help. You can get out of debt, so don’t lose hope!