The first step is to organize your debt which means creating a list of all outstanding debt obligations including lender name, interest rate, loan type (credit, loan, installments). Then, negotiate the interest rates on credit cards to lower the total cost of that credit type. Finally, budget enough funds to make the minimum payments for each debt and allocating additional funds to higher interest rate loans.
There are five ways to manage your debt repayment:
- Debt Payoff – Use a debt repayment strategy such as the Debt Avalanche or Debt Snowball Methods to payoff credit card debt.
- Debt Consolidation – A process of combining debts into one loan or repayment plan. You can consolidate your multiple student loans into one refinanced student loan reducing the number of payments to one single payment and potentially lowering your monthly payment and decreasing your interest rate. Additionally, consolidating your credit card debt into a debt consolidation loan for lower interest rates and fixed repayment term.
- Debt Management – Debt management is the process in which you manage the repayments of debt usually through a program called a DMP (Debt Management Plan). If you find you are struggling to make payments, it’s time to work with a DMP provider that can work out a program with your creditors to lower interest and set a repayment schedule.
- Debt Settlement – A process where you pay an agency to negotiate directly with your creditors in the hopes of making significantly reduced settlements for your debts.
- Bankruptcy – A legal proceeding which allows a debtor to discharge certain debts or obligations or allows the debtor time to reorganize his/her financial affairs so he/she can fully pay the debt.