How to Reduce a Debt Problem

Debt problems can sneak up on consumers. Whether you struggle with job loss or health issues, getting stuck in financial hot water is stressful. Reducing debt can be accomplished. However, it's not a quick fix. Tackling debt takes hard work. You'll need to create a repayment plan and partner with creditors to reduce debt obligations for good.

Instructions

1

Create a budget. The Federal Trade Commission (FTC) recommends creating a budget to get debt under control. List the amount of money coming in each month. In another column, list each debt obligation, and the amount owed. Look for opportunities to reduce spending. For example, if food expenses are high, cut back on eating out or buy groceries in bulk to reduce per unit costs.

2

Contact your lenders about debt obligations. If you're struggling to make monthly payments, negotiate lower payments. Lenders are motivated to work with you. However, according to the Federal Trade Commission, it's important to do this before the account is turned over to collections. Otherwise, your credit score will suffer.

3

Deal with accounts in collections. If accounts have already been turned over to collections, ask about cash settlements. Collections may settle debt for pennies on the dollar.

4

Consolidate debt obligations. For example, if you have several credit cards, consider balance transfer offers. These offers provide a low interest rate for a fixed term. Choose an offer that doesn't charge transfer fees. These fees add up to hundreds of dollars. Personal loans are another option. If the interest rate is lower than your existing lender, you'll be paying more on principal each month. Check out Bank Rate (see Resources) to find lenders.