Debt Plan Solutions

Too much debt may stop you from doing the things you want to the most. Debt can make it difficult to start your own business, take your dream vacation or from retiring early. It is important to have a plan to deal with your debt, and to consider all solutions before choosing the right one for your needs.

Debt Payment Plan

A debt payment plan can help you get out of debt without negatively affecting your credit. List your debts in order from highest interest rate to lowest. Apply any extra money to first debt on your list, while continuing to make minimum payments. An effective budget is an important part of this plan. You can use your budget to find areas to cut spending so you have more money to put toward debt. It can also stop you from accumulating more debt.

Settling Debt

Another option is to settle your debt with your creditors. This option only works if you are several months behind on your debt, and it will negatively affect your credit, which may make it difficult to qualify for a mortgage or business loan. Save up about 50 percent of what you owe on a loan, then contact your creditor and offer a lump sum payment to settle the debt. Do not send any money until you have received a letter stating that the payment will count as settlement in full. You will need to pay taxes on any amounts that are forgiven. There are companies that will do this for you, but you need to make sure they are in good standing with the Better Business Bureau and have been open for several years.

Negotiating Terms

You can negotiate better terms on your debt while you are working to pay it off. Contact your creditors to see if they will reduce your interest rate or waive late fees. Another option is to move all of your debt to an interest-free credit card or to take out a consolidation loan to lock in a lower interest rate while you work on paying off your debt. A credit counseling agency will be willing to work with your creditors for you, but it will affect your credit report, and you need to choose a reliable agency.

Staying Out of Debt

When you are working on getting out of debt you need to commit to staying out of debt as well. This means stopping using your credit cards and saving money for bigger purchases such as home repairs or a new car. Acquiring debt while working to get out of debt does not make sense. Set aside money in an emergency fund to help you cover car repairs and medical bills so you do not have to rely on your credit cards.