With a little dedication and prior planning, it is possible to reduce your debts on your own. Why pay debt counselors and consolidation agencies fees for things you can do yourself? Credit.com shows you the tricks of the trade and the fastest way to reduce your debts on your own.
Step 1: Evaluate Your Debts
Collect all of your financial documents and print out your free annual credit reports. Use Credit.com’s free credit report card to see exactly where you stand to see exactly where you stand. This is an important step toward debt recovery and one that people are often scared to take. On a piece of paper, write down the balances, interest rates, and monthly amount due for each of your debts. Include your auto loans, personal loans, payday loans, credit cards, and other debts. You should also make note of any annual fees on your credit cards. You don’t need to include your mortgage loan or student loans at this time. These loans have relatively long terms and low APRs so it is better to focus on paying off your other debts first.
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Step 2: Look at Your Budget
After you have collected the information about your debts, you should take a look at your monthly budget. Write down your monthly income after taxes and subtract your rent/mortgage payment from this amount and other monthly expenses such as childcare, student loan payments, insurance, utilities, and groceries. Once you have subtracted all of your expenses, calculate how much you have left to pay off your debts. If this amount is too small, look for ways to reduce your spending. Consider turning off your cable subscription or carpooling as ways to cut back temporarily. The more you can pay towards your debts each month, the sooner you will be debt free.
Step 3: Make a Plan
Now that you know all about your financial situation, it’s time to create a plan for reducing your debts. Use your information from Step 1 and 2 to fill in the following chart. Subtract your minimum debt payments (Step 1) and monthly expenses (Step 2) from your monthly income after taxes. The remaining amount should be used to pay off the debt with the highest interest rate and the highest balance.
Category: Payday loans