How to Reduce Debt by Up to 70 Percent

Getting into debt is easy. Getting out of debt is hard, but with determination, you can reduce your debt. If you face financial hardship, you may be able to use a debt reduction plan to reduce your debt as much as 70 percent. The reductions must be negotiated with creditors, and the percentage of reduction attainable varies. If you want to reduce your debt while your account is current, your creditors are unlikely to agree. If you are seriously delinquent, you may contact your creditors individually to negotiate a debt reduction, but chances are you will need the services of a reputable debt settlement company to be successful.

Instructions

1

Compile a list of your consumer debts such as credit cards, personal, nongovernment student loans and auto loans.

2

Calculate your total debt. Figure out the percentage of each debt relative to the total. If credit cards represent a large percentage of your debts, make a note to start with reducing credit card debt. You should also classify your debts based on annual percentage rates. Credit cards, particularly department store cards, and personal loans carry the highest APRs.

3

Create a list of income sources and total expenditures that include household costs and other necessities. Part of the requirements to work with a debt settlement service is to figure out your debt-to-income ratio, which establishes your capacity to repay your debts.

4

Research national debt settlement programs at The Association of Settlement Companies website. Choose a company that is accredited and bonded through TASC. A number of companies' debt settlement services include credit counseling and debt reduction programs. Through them, you may seek interest rate reductions or principal balance reductions on your debts. An interest rate reduction lowers your monthly payment, allowing you to pay more towards the principal each month, but your overall debt amount is not settled for a lower amount. In a debt settlement, your debt settlement company negotiates a reduction of the principal balance with your creditors. The actual reduction amount varies based on the type of debts you have and what your creditors are willing to accept.

5

Contact a debt settlement service and explain your financial situation. Based on an evaluation, the representative will be able to determine which program is right for you. Inquire about service fees, which are based on how much debt you have. Some debt settlement companies charge fees up front. However, reputable companies will only charge you if they are able to successfully reduce your debt.