7 Tips To Help Reduce Your Debt

As debt continues to increase in many households across America, more families each year are finding themselves looking for ways to reduce their overall household debt. For some, this may be easier said than done. Debt reduction requires a lot of hard work and dedication. Especially when you are used to spending money left and right.

Those that are serious and committed to reducing their debt will eventually reap the rewards of being debt free. Reading my simple seven tips will give you many ideas, about how you can reduce your debt.

Cut back
When you start to cut back on spending, you will find corners that you can cut through out the month, to help you pay off your debts. Simple things such as, being aware of all of the electricity you use, and turning off lights that are not needed as you leave a room, will help reduce your light bill, therefore, you save a little more money to reduce your debt with. Once you become aware of your spending habits, and start cutting back, you will start to notice more ways to cut back each month.

Budget your income. List all of your monthly bills and their due dates. Apply them to your budget, as well as other household needs, for example, groceries, gas etc. Allow yourself only so much money per month to spend on extras. Sticking to your budget will show self control, and determination for reducing your debt.

Limit the use of your Credit cards
If you can not pay cash for it, then do not buy it. If you have to charge something, make sure that you can pay the balance in full when your next credit card bill comes in. Never charge on your credit card to only pay the minimum monthly amount. You will never get that maxed out credit card paid off that way. The importance of paying your credit card balance in full, can not be stressed enough.

Get rid of your credit cards
If you are determined to reduce your debt, cutting up your credit cards will help. If you do not have them, you can not use them. If this is too big of a step for you, at least get rid of the unnecessary ones. Keeping only one or two, low interest rate cards for emergencies only, is a good idea. Remember if you can not pay cash for something, then you probably do not need it.

Pay off your debts
If you have already acquired some debt you need to pay off, now is the time to get started. Decide which debt is your smallest and start with that one. Pay on it as your budget will allow. Once you have gotten your smallest debt paid off, you will have a feeling of satisfaction and know that you can pay off your debts. Then move to the next smallest debt, when you are paying them off one by one, it is easier to do, with out feeling over whelmed. Before you know it, all of your debts will be paid and you will feel great about knowing you paid them off.

Debt consolidation
Debt consolidation is another option to look at for reducing your debt. Debt consolidation companies, will call your creditors for you, and make payment arrangements for your debts. Many companies will get you one low monthly payment to pay each month, until all of your debt is paid off.

Financial counseling
Make an appointment with a financial counselor to help you reduce your debt. Some people find, having someone else point out the errors in their spending habits to help tremendously. Financial counselors can also show you how to better manage your money, and stick to a budget.

Debt Negotiation Tips

When you reach the position where you can’t afford your debt repayments, it’s time to take action.

Instead of running from your situation you need to take positive steps to fix it. If you reach the stage where you can’t keep up with the repayments, it’s VITAL that you contact your creditors as soon as possible and explain your situation.

It will help your situation greatly if you mange to contact your creditors before they contact you.

It will show them that you take your situation seriously and have taken responsibility for the state of your finances. It will reassure them that they’re more likely to receive their money….eventually!

Now this may be hard to believe, but your creditors won’t want to take court action against you unless it’s absolutely necessary.

Would you like to know why? Well first, all court action is time consuming, costly and unpredictable. It’s generally a last resort, when all other avenues have been exhausted.

Second, it’s a question of maths. It’s just a simple commercial decision. If you were in the business of lending money and someone was having trouble repaying you, let me ask you a question. Would you rather receive all of it over a much longer period that originally agreed, or 20 cents in the dollar months later when the bankruptcy courts get it all sorted out?

Exactly! There’s no contest. Bankruptcy benefits nobody (well, apart from the lawyers and accountants, but that’s another matter!)

And most lenders realise this!

If they’re offered a reduced payment schedule over a longer period, most will be glad to accept it. In most cases it will allow them to receive more of their money back than the alternative of bankruptcy. And that my friends, is your opportunity to find a solution to your debt problems!

Contact Your Creditors Early

As soon as you know you won’t be able to keep up with your repayments, get in touch with your lender. Write to them explaining your situation, giving them the reasons for your financial difficulties. Creditors will often be open to negotiation, and dare I say it, quite helpful. As I say, they just want to ensure that they get as much of their money back as possible. It may be possible to work out a more suitable repayment schedule that will allow you to pay off your debts.

If you ignore your creditors, they’ll have you in court quicker than you can say bankruptcy! Ignoring letters from creditors tends to make them ratty. Remember, they don’t want to take legal action, unless your actions force them to! But if your general attitude says to them ‘I’m in this position because I spend recklessly and have a cavalier attitude towards my debts’, they won’t have any choice.

Once you’ve drawn up a personal budget and know how much you can afford to pay towards your debts each month, contact your creditors and make them an offer. It’s best to keep your offer of reduced monthly payments as brief and precise as possible. But above all, make it honest and realistic.

This is good ‘I would therefore like to offer $15 per month to repay this account’.

This isn’t ‘I’m hoping that things will get better over the next couple of months, so I’ll increase my payments as much as I can at that time’. Rubbish! The lenders would laugh in your face at that sort of offer!

And whatever happens, when it comes to making an offer of reduced payments, don’t bluff your creditors.

by Stuart Laing

Copyright (c) Get Out Of Debt

Getting A Good Deal on Low Interest Debt Consolidation Loans

Falling in debt is a very painful process of life, which practically every one falls into at one time or the other. Sometimes, you may not know what to do to get out of debt; it is in such conditions that it is better to approach a debt consolidation company for a debt consolidation loan.

A debt consolidation loan is a loan that replaces multiple smaller loans wherein you make a single payment to the debt consolidation company. This loan is usually for a longer period, and at a lower interest rate. The main advantage of a low interest debt consolidation loan is that instead of having to face numerous creditors every month to make their monthly payments, this job is handled by the debt consolidation company. They will pay the individual companies their payments with the single payment you make to them.

There is huge competition among debt consolidation companies, on who provides the loan at a lower rate. So to get a good deal on a debt consolidation loan, you have to first calculate all debts, and interest, incurred by you. With this, you can decide which debt consolidation loan is offering a lower interest than the interest rates of the loans you already have.

It is important to place some collateral for a debt consolidation loan, like a home, car, and vehicle. However to get a low interest debt consolidation loan, it is better to offer a property with a higher collateral value. The lender is sure to offer you a lower rate with the high property placed as collateral.

When the amount you borrow is lower than the collateral, the lender faces a lower risk, and will thereby be ready to offer you a low rate debt consolidation loan. Avoid borrowing more money than you need. This only increases your debt, and will bring you a higher interest rate! And try to opt for a short repayment schedule for the debt consolidation loan. Repaying a debt consolidation loan can possibly to take a long time of up to 30 years. However, the longer the period, the higher the interest!

Approaching small finance companies for a debt consolidation is another strategy to employ to get a low interest debt consolidation loan. This is because as they are usually startup companies, they are always on the lookout for new clients, and are ready to quote low interest rates.

Once you decide on the right debt consolidation company offering a low interest debt consolidation loan, counselors will be sent to you to access your financial position. Once they get an idea of all your loans and creditors, they will approach your creditors to negotiate for lower monthly installments and interest rates. The creditors usually oblige to this as they consider a lower payment is better than no payment at all!

Some debt consolidation companies may charge a fee for these services, while some do it for free. Then once the creditors are all approached, and monthly payment set upon, you just have to pay the company and they will pay your creditors on your behalf!