When debt spirals out of control, a proactive debt consolidation plan often becomes the alternative to bankruptcy. The sooner the debt monster is tamed, the less damage is done to credit scores, retirement savings and other future financial plans. Getting out of debt starts with taking an honest look at all outstanding balances and finding ways to minimize this debt.
1. Take inventory
Start on the path to eliminating your debt by assessing all your outstanding loans and balances. The first and often most painful step is measuring your total debt, including projected future interest, and determining how long it will take to pay it off.
Write down all your debt, with key information such as the amount owed, interest rate and monthly payment terms associated with each lender. With this total in mind, it's possible to enter credit counseling, where interest and payments can be reduced through negotiation, saving thousands of dollars and drastically cutting the time it takes to become debt-free.
2. Try a debt repayment calculator
A debt repayment calculator is helpful to determine how long it will take to pay off debt and how much interest will accrue. Using the figures you come up with after taking inventory, a repayment calculator will show realistic payment plans and schedules. If you are in a position to repay beyond the minimum payments, this can also be factored into the calculator.
3. Reduce interest
One of the most active methods to eliminate debt is by taking measures to reduce interest and pay off debt faster. While some individuals go to drastic lengths to cut all nonessential spending and redirect income toward loan balances, not everyone has to resort to extreme frugality to reduce outstanding interest. However, most people are able to find some room in the monthly budget to cut unnecessary expenditures and work toward long-term financial stability.
4. Take advantage of deferred interest
Finally, be sure to take advantage of deferred interest on credit cards, such as through tire and auto repair cards. Deferred interest plans give you more time to meet monthly payments. These programs can truly be a lifesaver, especially when money is tight at the end of the month.
Credit First National Association helps provide financial flexibility by managing automotive and expenses. Contact us today to learn more.