Debt is something that happens to almost all of us. Between student loans, mortgage payments, car payments, etc, dealing with debt is something that we all have to figure out how to do. The key is to learn the skills necessary to avoid debt as much as possible. Learning how to use debt properly and handle our finances responsibly is a skill we learn and not something we are born with.
Many of us toy with the idea of simply not paying our debts. Here’s the thing: just because one company gives up on collecting from you doesn’t mean that you’re in the clear. There are lots of companies out there that are built upon the purchasing of defaulted debts and loans. If you’re lucky, your loan will be purchased by a company like Calvary Portfolio Services—which prides itself on helping debtors pay off what they owe.
Unfortunately, not everybody is that lucky. There’s a reason those clichés about debt collectors exist! So what do you do? You can’t afford to pay it all off at once, but you can’t afford to make huge monthly payments, either. If you don’t know where to turn, consider getting help from a credit counseling service. A great example is the story of Wendell and Linda Ramage. They paid off 50K in debt that they racked up due to illness later in life with the assistance of a Consumer Credit Counseling Service.
What matters is that you don’t miss or skip payments. For a few months, while you’re working to gain control over your finances, paying the minimum due on each account is okay and can help you literally buy yourself some time. Then, after you’ve figured out your income and expenses you can come up with a better amount to pay each month that will help you reach that number.
The New Minimum
The easiest (and cheapest) way to figure out your new minimum payment is to do this: pull up your most recent statement from each of your creditors and lenders. Locate two numbers: the minimum amount due and the amount of interest that was charged to your account. Add those two numbers together. Add five bucks to that. This way you’re paying off your interest and paying down your balance at the same time. This is the new minimum you need to pay every month.
Pay Off the Lowest Balances First
Most credit counselors will tell you that the best way to pay down debt is to focus first on the accounts with the highest interest rate. It’s a solid plan because the higher the interest rate the more you pay on the account. You save more by paying off high interest accounts quicker. But… If you’re staring down a huge mountain of debt, it’s easy to get overwhelmed by those huge accounts. Start by focusing on the smaller accounts. The satisfaction you get from paying off those debts will give you the added enthusiasm you’ll need for staying the course while you pay off larger debts.
Use the Phone
Did you know that you can often get a lower interest rate on your debts simply by calling up the company and asking for it? If you’ve got a solid repayment history the company is going to want to keep you around and will likely reduce your interest rate because they want to keep your business! The worst that will happen is that they’ll say no.
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|How to Get Out of Debt, Stay Out of Debt, and Live Prosperously||Debt-Free Forever: Take Control of Your Money and Your Life||Negotiate and Settle Your Debts||Deal with Your Debt: Free Yourself from What You Owe, Updated and Revised|
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