Managing your debt is a skill that you should be developing constantly. Allowing your debt to get out of control can lead to consequences such as a lowered credit rating, dealing with collections representatives and not being able to get the financing you need for important purchases, such as a home or a car. You can employ several strategies to help you control your debt, and once you get into good debt management habits you will start to see positive credit results.
Organization
According to Bankrate.com, one of the key components of a good debt management plan is organization. Create a budget each month that consists of all of the bills that need to be paid vs. all of the income you will be receiving. Use the excess cash to pay down debt and pay for regular monthly expenses, such as groceries and fuel for the car. Several computer programs can help you develop an effective budget, and they can also help you arrange your bills by their due date so that you always pay your bills early or on time.
High Interest Debt
If you compare the statements for your various credit cards you will notice that your interest rate varies for each card. The higher the interest rate on your credit card, the less you are paying off each month in principle. A card that has a 25 percent interest rate will apply less of your minimum monthly payment to the balance than a card with an 18 percent interest rate. That is why you should begin paying off your debt by paying down your highest interest rate credit cards first. Get rid of the high debt cards, and you will have more of your monthly payment going toward reducing your balance rather than to interest.
Take Responsibility for Debt
The Federal Trade Commission suggests working with your creditors before you start to have problems paying your bills to see if they have any programs that may help you to stay on track. You may be able to get a forbearance on your auto or home loan that will move your payment to the end of the loan and allow you time to catch up on other bills. Keep in mind that interest will accrue during a forbearance, so it is not a complete suspension of your payments. Contact your credit card companies and let them know that you are having a difficult time making payments and see what kind of help they can offer.
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