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Debt Counseling: 5 Easy Steps to Better Debt Management

 

Debt to 2017 is what breathing is to life. Debt is a household commodity that is following us better than our shadows. Although it may sound really scary, in reality, it is not. Managing debt is actually quite easy if you have the right guide.

To get out of any kind of debt, you just need a good plan and the spirit to follow through. Here is a very simple 5-step strategy that can help you get out of debt this year.

Step 1: Start With a List

Write down all your expenses. Include every minute bills, credit card payments and loan payments too. Having things in black and white really help. If you keep mulling over all your expenditures in your head, they will naturally seem insurmountable. Here are the following things you need to write down –

  • Make a list of all your debts including all details of the creditor, interest rates, and monthly payments.
  • Make a list of all credit card debts and the payment details for zeroing out the credit cards within a given amount of time (say one year or three years from today).
  • Make a list of all loans and medical bills that your credit reports do not include.

Step 2: Reconsider Your Interest Rates

In all likelihood, you are paying a high interest rate right now. This happens when people keep taking small loans as and when they need without bargaining for the best interest rates. As a result, the total interest rate on all the loans become staggering. It causes your total payable to increase.

If you can decrease the interest rate on each loan, you will be paying a lot lesser. Here is what WE can do:

  • We will help you find out if you can qualify for lower interest rates.
  • We will reach out to your creditors and ask them to reconsider your payment terms.
  • We can help you discover balance transfer credit cards (with low rate) in your financial situation.
  • If you are a student or if you are still paying off your student loans, we can help you find out better ways to tackle each installment.
  • We can help you get better rates on your current auto loan.
  • We can also help you decide if you need debt counseling or professional debt consolidation.

Debt counseling will help you understand the gravity of each loan you are paying right now. Not only will this help you prioritize each expense, but it will also help you understand which loan you should pay off first. For example – you may be juggling 3-4 credit card loans at this moment. The first step is to find out which one is charging you the highest interest rate. The second step is to adjust your payment so that you pay off the card with the highest interest rate first and then move on to the other ones.

Step 3: How Much Are You Going To Pay?

Once you have your income and your expenses written down on paper, it will become easier for you to set an achievable goal. Here’s an example of how this can work –

  • Find out how much you earn per month and how much you are paying for your credit card bills.
  • Find out how much you are paying for groceries and utilities.
  • Make a total of your other expenses including transport and fast food.
  • Write down the total. This is your total monthly payment.
  • Deduct this from your monthly income. This can be your monthly savings.

If you manage to save something each month, you should certainly start an emergency fund. You can use this money for the times of extreme financial stress. This can be a medical emergency like an inflamed appendix or a car accident. We know, you have health insurance, but that will take a few days to come in. Until then, this emergency money will take care of you.

Step 4: Device A Strategy

When you are about to tackle a lot of debt, you need a strategy. It is not just a warm up; this is the battleground! You need all the faculties you have to charge at this problem and get the upper hand.

  • Can you pay the total monthly payment until you pay off your debt?
  • In case, the answer is a “No,” consult a professional debt counselor. If the answer is still negative, you need to contact a credit counseling agency immediately.
  • If you can pay off debts and your total monthly payment, decide which debt to pay off first. Should you pay off your vehicle loan first or your student loans? You can easily call up of expert debt counselor for these questions.
  • You can also set up an “auto-pay” system for minimum payment of all debts, except for the target debt.

Once you have paid off the target debt, choose another one as the target debt and start paying that one off.

Step 5: Monitor Your Expenses Closely

Once your plan comes live, you need to test its efficacy. It is always better to start off on a monthly basis. Make short-term plans with short-term goals. Evaluate your expense and savings every month. You can get one free credit report from each of the three authorized credit counseling companies in the U.S. Consider checking your credit report at least once a year.

During this time, monitor your credit score as well. Make sure it shows an upward spike. As your credit score shows improvement, new avenues for new credits will appear. You can even go for consolidation loans. This will save a lot of interest rates and overhead charges you are paying right now.

Most importantly, stick with this 5-step process until you have said goodbye to all your debt.

You can find out more pro-active ways to get rid of all debt. Debt counseling is the first step towards any debt management and consolidation program. You can find out more about your debt status, best possible interest rates and even find a practical loan repayment plan at https://bayareatitleloans.com/.

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