If you just discovered (or realized) that you are deep in debt, it can get disconcerting at first. Then, you feel the panic creeping in as you figure out how you got yourself into that situation.But regardless of the mistakes that you did in the past, one thing’s for sure, you need to start thinking about how you will reduce your debts.
For some people, ignoring the problem is their means to cope. This is something that you should not follow. Even if being in debt is a scary situation to be in, you want to face the music and own up to the responsibility of your debts. If you are unsure about how you can begin the road towards debt freedom, here are some debt reduction moves that you can do to get you started.
First of all, survey the extent of the financial damage. How much debt do you really have? It is difficult to identify the solution if you do not know the problem. Know what you are up against and you should be able to figure out the best and most effective way to overcome it. List all your debts with the respective account details, amount owed, current balance, interest rate, monthly payments and due dates. Separate your secured and unsecured debts.
Next is to know your arsenal. Know how much you can afford to pay off your debts. Create a budget, list your income and expenses to see how much is left after the basic necessities are paid off. Check your expenses to see which of them can be cut back on. Entertainment expenses are usually the first to go. Anything that you can live without must be let go.
If you have an idea as to how much you can afford in debt payments, it is time to call your creditors to ask them for a lower rate. There is no guarantee that they will give in, but there is no harm in asking. Just tell them your debt situation and how you are having a hard time paying off your current payment plan. Any debt that has a 15% interest and up should be negotiated. This may be hard to do if you are already late on payments but it is worth a try. You can both agree on a more structured payment scheme that fits your budget.
If your creditor refuses to budge and give you a lower interest rate, you have the option to transfer your balances. Let them know about it and if they want to retain you as a customer, they will open negotiations for the interest rate. If it falls out, then you know what to do. Look for a credit card company who offers a zero interest on new accounts. This introductory period usually runs between 6 months to a year. During this period, any payment that you make will be towards your principal balance. This is your chance to pay down a significant amount of your debts.
As you work on that, make sure you start practicing proper financial management skills. It is important that you learn how to keep yourself from incurring more debt. Just take it one debt at a time, be patient and disciplined. Soon you will find yourself in the brink of debt freedom. Then you can celebrate.