Debt Management Ideas

Knowing how to manage your consumer debt can result in lower balances and a higher credit score. The amount you owe to your creditors makes up 30 percent of your personal credit rating. Improving a low score and getting the best deal on financing can involve paying down your balances and practicing good debt management skills.

Stick to a Budget

Creating a monthly budget and staying in your budget can help avert debt. Developing a budget involves deciding how much of your income you'll spend on recurring expenditures such as housing, utilities, insurance, food, debt payments and transportation costs. Set aside a modest amount for recreation and miscellaneous spending. Going over your budget can deplete disposable income and may force you to use credit cards to make ends meet.

Avoid Extra Fees

Paying credit card statements and other bills late can result in additional finance fees or late fees. Eliminate this extra expense by always paying your bills on time. Set up automated withdrawals from your bank for a specific day each month to ensure your creditors receive bills by the due date. If you risk missing a payment due to cash flow issues, talk with your creditors a few days before your due date to ask for a payment extension.

Interest Rate

Take a chance and ask your creditors to reduce the interest rate on your accounts. They can either grant or deny your request, but you don't know until you ask. Getting a lower interest rate will save you money in interest charges each month. This results in a quicker reduction of the principal balance. Expect your creditors to quickly review your payment pattern before lowering your rate. A history of missing payments or skipping payments may prompt creditors to deny your request for a cheaper rate.

Minimum Payments

Pay more than your minimum each month. Even if you can't pay off a large lump sum of your debt, aim to increase your payments by doubling or tripling the minimum. This method pays down the interest charges, plus a higher percentage of your principal balance.

Save Your Cash

Don't use credit to instantly satisfy your wants. This can result in higher debt balances. Use credit cards only if you're confident in your ability to pay off the debt within a month or two, preferably a month to avoid paying interest. If you doubt your ability to pay off the debt, postpone the purchase and start saving to pay for the item with cash.