If you started the new year with a mountain of debt, you’re not alone. Whether your debit crisis was caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming, but often you can overcome it.
Your financial situation doesn’t have to go from bad to worse. Make this year a year to reduce your debt!
#1 Develop a budget. The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend.
#2 Contact your creditors. Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.
#3 Ask for lower rates. Most credit card companies will lower interest rates when asked, especially if you mention a “hardship plan,” designed for those that are going through a struggle for a short time. Lower rates mean your payments go more toward principal instead of interest.
#4 Send extra payments. Make at least the minimum payment each month on every account, but send that extra amount to help make a bigger dent. As soon as that debt is paid off, put its payment and the extra toward the next account on your target list.
#5 Stick to the plan. It can be tempting to use your credit cards again once the balances are lowered, but that will only make it harder to get out of debt, and the process may take longer. Resist the temptation and keep your eyes on your long-term goal.
To get started with budgeting and debt reduction, check out this Budget Calculator from the FTC.
For more tips you can trust, visit bbb.org.