How to Settle Consumer Debts

It can be easy to become buried deep in consumer debt. If you have been laid off, had a pay cut or have been injured the bills can pile up quickly. Although paying off debt can be overwhelming, there are options available. Don't fall behind and get sent to collections. Be proactive and work with your debtors to come up with a plan.

Instructions

1

Create a spreadsheet calculating your monthly income and expenses. Separate your expenses into two categories. Have one category for necessary monthly bills, such as mortgage payments, electricity and food. Then, make another category for the debt you are trying to reduce or pay off completely, such as credit card debt or personal loans.

2

Calculate how much money you have left at the end of the month after paying all necessary living expenses. Figure out how you want to divide this money. For example, if you have two credit cards that you are trying to pay off and one has an 8 percent interest rate and the other has a 14 percent interest rate, have a greater ratio of the money go towards the second card.

3

Call your credit card companies and try to negotiate a deal. It is possible to get your interest rate lowered which will save you money in the long run. If you are having trouble making the minimum payment on a credit card, ask if you can have that payment lowered even if it means it will take you longer to pay the debt off. The credit card company would rather receive some form of payment from you than to be left completely high and dry.

4

Contact your bank to discuss the terms of your loan. If you took out a loan to buy a car or another expensive item and are having trouble making the monthly payment, see if you can turn your three year loan into a five year loan. This will lower your monthly payment and help you to avoid being sent to collections.

5

Sell some items for extra cash. If you need more income to make larger payments towards your debt, consider selling old iPods, used TV sets, designer clothes and other personal belongings on an auction website.

6

Cut up your credit cards. Do not charge anything additional while trying to pay off your debt. Even a small purchase here and there can put a big wrench in your plans.