Get Started Now image

By clicking on "Get Started!", I agree to the Terms of Use, Privacy Policy and ESIGN Consent

How To Deal With Debt Problems

Anyone with any amount of debt must know how to manage it. Even if you only have a small amount of debt, it is important to maintain your payments and ensure that it does not get out of control. 

However, if you have a lot of debt, you will need to work harder at paying it off while also paying your monthly bills.

Find out how much you owe

You should make a list of all your debts. Include the name of the creditor, the total amount, the monthly payment, the interest rate, and the due date. 

Check your credit report

To confirm the debts in your list, you can consult your credit report. You will be able to see all of your debts and keep track of your total debt. 

Once you know how much of your income and debt you have, you can calculate your Debt-to-Income Ratio. This tells you how much income goes toward debt payments. It is easy to calculate your DTI. Just divide your monthly debt payments by your income and multiply that number by 100 to find it in percentage form. 

Track your finances

Do not just make a list and forget about it. You should refer to your list regularly, especially when you pay bills. As your total debt increases, you should update your list every few months.

Every month, pay your bills on time

Late payments can make it more difficult to pay your debt. You’ll be charged a late fee each time you miss a payment. This means that you will see an increase in interest rates and finance charges if you miss more than two payments.

You can use a calendaring program on your smartphone or computer to create an alert to remind you of the due date. You should not wait for the due date to make a payment. Credit bureaus could report it if you have missed a payment. Send your payment immediately after you realize it was late.

Create a budget

Budgets can help you avoid debt and can also help you get out of it. It helps you to clearly see how much you make and where it is going. You should create a budget that covers basic expenses like rent, mortgage, and utilities. 

Make a monthly bill payment calendar

To help you determine which bills to pay with each paycheck, use a bill payment calendar. Next to each due date, add the bill’s payment amount to your calendar. Next, enter the date for each paycheck. You can use the same calendar month to month if you get paid on the 1st and 15th of each month. However, if you get paid on different days each month, you will need to make a calendar for each month.

Pay at Least the Minimum

You can only make the minimum payment if you cannot afford to pay the full amount. The minimum payment won’t make you any progress towards paying off your debt. It keeps your account in good standing and avoids any late fees. If you fail to pay your bills on time, it is harder to catch up. Your accounts may become in default.

Avoid credit cards

Stop using credit cards while you work to reduce your debt. Instead, carry cash with you all the time. Ensure that you stick to your budget and only purchase with cash if necessary.

Choose which debts you want to pay off first

It is often a good strategy to pay off your credit card debt first. Credit cards have higher interest rates than other debts. The highest rate credit card usually gets priority for repayment, because it costs the most.

Your debt list can be used to rank and prioritize your debts. You can then pay them off in the order that you prefer. The debt with the lowest balance can be paid first. Although this may be more expensive in the long term, it can help build confidence by paying off smaller debts first.

Payment off Collections and Charge-Offs

Your debt can only be paid as much as you are able to pay. If you don’t have the funds to repay your debts, keep your other accounts in good standing. 

Do not sacrifice positive accounts to pay off debts that are already affecting your credit. Instead, make the payment on past due accounts as soon as you can.

Have an emergency fund

With an emergency fund, you would have to borrow money to pay for an emergency expense if you don’t have enough savings. Even a modest emergency fund can cover small expenses that arise every now and again.

Start by creating a small emergency savings fund, $1000 is a good starting point. After you have this, set a goal to build a larger fund of at least $2,000. The aim would be to have a reserve that covers three to six months of your living expenses.

Recognize the signs that you need help

You may need outside help if you have difficulty paying your bills and debts each month. There are other options available for debt relief. These include the following:

· Consolidate your debt

· Settlement of debt

· Bankruptcy

Each has its advantages and disadvantages so make sure to weigh all your options.

Tags

data collection
payment plan
debt management plans
save money counseling services
phone number
credit counseling agency
financial situation
debt collectors