If you’re tired of those relentless calls from debt collectors and the pile of bills you haven’t even begun to tackle yet, the following tips can easily help you pay off your debt once and for all:
1. Create a budget
If you haven’t already, sit down and make a list of the money you have coming in, and where it goes each month. It may not be the most thrilling task in the world (in fact, it can be downright depressing), but it needs to be done if you want a simple way to begin tackling your debt. Identify the expenses that are variable and the ones that you can cut down on. Some of your monthly expenses will be fixed, such as your rent. But other things, like food, utilities, etc. will vary month-to-month. Find things you can cut down on, ways you can spend more sensibly, and things you can get rid of completely (i.e. that monthly gym membership you’ve only used twice in the last three years). Once you can find areas that free up some extra cash, make a commitment to put it towards your overdue debts.
2. Go beyond the minimum payment
It may seem impossible if you’re already struggling to make those minimum payments, but if you budget accordingly, it can be done. If you really want to make some serious progress, making the minimum payment won’t do much because that money mostly goes towards interest. Make it a goal each month to pay just a little bit more than your minimum. Even if you’re just paying a few bucks more, it’s a start. You can begin lowering more of your principal (and overall balance) when you go beyond that minimum payment.
3. Pick a repayment method
You can tackle the debts that have the highest interest rate first and then work your way down. This might be a good method to choose if you have some credit cards with insanely high APRs. You’ll notice that as you begin banging out the stuff with sky-high interest rates, you’ll start saving more money overall. Another approach is just to work on your debts by the balances; you can start with your highest balance and work your way down, or if you want to begin closing out accounts as soon as possible by paying them in full, you might want to just get those small accounts out of the way first.
4. Don’t dodge the phone calls
If you’ve gotten into the habit of storing all debt collector phone numbers under a “Do Not Answer” contact on your cell phone, or you’ve just simply blocked and/or tend to ignore any numbers you don’t recognize, consider actually answering. In fact, be the one to pick up the phone and reach out to them. Explain what’s happening and why you’ve fallen behind on your bills. Then, ask about settling your debt for less than what you owe. The older the debt, the more you’ll likely be able to negotiate it down. It’s actually possible to settle thousands of dollars of debt for just a few hundred. If they think they aren’t going to get anything out of you anyway, they often feel they have nothing to lose. At this point, settling may not help your credit score—unless they agree to wipe the debt from your credit report and mark it as paid in full. But at the very least, you won’t have to worry about other serious consequences, like your wages getting garnished.
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Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.
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