Debt solutions that don't require assistance from a debt consolidation or credit counseling agency can help pay down high balances without a monthly service fee. High debt levels can affect credit scores, and if buying a house, outstanding debts can reduce the amount that you're able to spend on the purchase. Do-it-yourself solutions can bring down your balances and put you on the path to better finances.
What Do You Owe
Know what you owe on all your credit accounts and the interest rate charged by your creditors. Look at your statements and write down each balance and the APR. Calculate the total of your outstanding balances. Solving debt involves first knowing what you owe your creditors.
Budgeting
Look at your budget to see how you spend your money. Excess spending can slow down debt elimination efforts because you're likely buying items you can't afford with credit, or using money to make unneeded purchases. Maintain all receipts for 30 days, and then assess where your money goes. Create a spending budget and determine how much you need for housing, transportation, food, utilities and other importance necessary expenses. What's left after paying recurring expenses is your disposable income.
Debt Elimination Goals
Setting long-term goals helps you achieve debt-free living. Take your disposable income and divide this number by the amount you owe. If you owe $5,000 on a credit card, and you have $200 in disposable income each month, it takes about 25 months to pay off the debt completely. Plan to pay down debt little-by-little each month until the balance disappears.
Interest Rate on Your Debt
Speed debt elimination by negotiating a cheaper interest rate on your accounts. Creditors charge interest so that they can earn money from financing your purchases. Most credit accounts have an assigned interest rate, but this doesn't mean you have to pay exorbitant fees each month. Talk to creditors about reducing your rate to pay less in less interest charges each month. Move your balances to a low-rate credit card if unable to negotiate a better rate.
Stop Living on Credit
Living off credit can keep you in debt. Use credit cards as a last resort, and only as a short-term solution to cash flow issues. Pay for the majority of your items with cash, and if you do use credit, always pay off balances at the end of every month to avoid debt.
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