Paying Down Debt

Learn more about the different options available to help you become debt-free.
Find out what debt consolidation means and how it can help you lower your monthly payments.
Consumer credit counseling, a form of debt management, is ideal for those that don't qualify for a loan but still want a lower rate. Get more information here.
Read what you need to know about this alternative to bankruptcy. Cut your payments and find a plan that fits your monthly budget.
Thinking about making a fresh start? Discover everything you need to know about the different types of personal bankruptcy and small business bankruptcy.

10 Ways to Dig Yourself Out of Debt

Do you sometimes feel as though you're drowning in debt? Don't panic. There are measures you can take to help get out from under your debt burden. Here are ten steps that you can take to start digging yourself out.

  1. Look at your spending habits. Before taking out any loan or starting on any sort of debt management or debt consolidation, you should look at your spending habits and do your best to change them so you don't wind up back where you started. Paying off your debts only to accumulate new debts can mean you will never break the cycle.
  2. Spend less than you make. You may have heard this before, but it's worth repeating and worth practicing. The less you spend and the more money you have available to pay down your debt, the sooner you will be free from it.
  3. Ask your lenders and credit card issuers for a lower interest rate. Many companies will work with you to establish a payment program with a lower interest rate. It never hurts to ask.
  4. Use cash wherever possible. Whatever it takes to enforce this rule, do it. If it means locking your credit cards in a safety deposit box or freezing them in water (people have actually done this), keep yourself from using your credit cards and creating more debt.
  5. Consider taking out a home equity loan. Do you own your own home or condominium? If you have available equity (equity is the difference between what's left unpaid on the mortgage and the value of the home), you may be able to obtain a home equity loan. There are advantages and disadvantages to tapping your home equity. A large disadvantage is that if you pay off the debt using the loan, but then create new debt with more credit card purchases, you will have both the credit cards and the home equity loan to pay off. This means that you would be deeper in debt than you were before. However, if you are disciplined and use the home equity loan to pay down your credit card debt, you will be paying significantly less interest. If you have enough equity to pay off more than one card, you will consolidate your payments and simplify your monthly budget. The major consideration to keep in mind, and maybe the most important one of all, is that if you do take out a home equity loan, you could lose your home if you are unable to pay back that money. While it is an option, it's not a solution to take lightly. If you should become unemployed and find yourself unable to work due to illness, that loss of income could lead to the loss of your home.
  6. Make sure you continue to pay your bills. Even if you can only make the minimum payments, this is better than making no payments at all. As with your lenders, contact your local utility company or phone company to find out if they have payment plans or other options available.
  7. Review your bills. By gathering your bills together and looking them over, you can get a better sense of the amount you owe, who you owe it to, and what the payment terms are. With that in mind, you can begin to budget your spending and pay down that debt.
  8. Use the "snowball method". This method involves focusing on paying above the minimum to the highest interest rate account and keeping this up until that account is paid in full. Then move on to the next highest interest rate account and pay more than the minimum monthly payment until that one is paid off. Repeat this process until you've paid off your bills.
  9. Pay more than the minimum due. If you are able to afford to pay even a little more than the minimum payment, do it. If you are able to double that amount, that's even better. It all comes down to what you are able to put towards paying down your debt. If you have a minimum payment of $30 a month, finding a way to pay $35 or $40 or even $60 will help you pay off that bill faster than just the two or three percent of the balance (that's roughly what a minimum payment comes out to). In addition, the quicker you pay down your balances, the quicker you'll be reducing the ratio of your total credit card balance to total credit card limit, which will help boost your credit score!
  10. Be mindful of the details. Make sure you know the payment due dates and the minimums for all of your debt accounts. If it helps to write this down on calendar or to create online calendar reminders, you should do so. You don't want to be late in making any payments as this can lead to penalties and hurt your credit score.

If you'd like to learn more about how AmOne's free service can help you with your debt, contact us today. You can either answer some questions on our debt solutions form or call AmOne toll-free at 1-800-781-5187. Our knowledgeable financial search specialists are available Monday through Friday from 9:00 AM to 9:00 PM and on Saturday from 9:00 AM to 5:00 PM.

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