Tag Archives: Debt reduction


With proper planning, one can reduce the debt by one’s own efforts and dedication. Though debt counselors and also the consolidation agencies can help in debt reduction, doing so by ones own self saves money on the fee. The first step in debt reduction is the evaluation of the debt. This can be done by collecting the financial documents and printing the credit reports. An important step, this would give a clear picture of where a person stands. The necessary information – the balances, rate of interest, monthly amount due should be written on a paper. All the loans should be included in this. This includes the auto loans, credit cards, personal and payday loans, and other debts. The annual fee on the credit card should be noted. The mortgage loan and also the student loan may not be included. If the amount of debt is overwhelmingly high, one can consider free consultation with a professional dealing with debt help.

The next step in debt reduction is looking at the monthly budget. One should note down the monthly income after the taxes are paid. The payment of rent or mortgage should be subtracted from this amount and also other expenses like childcare, insurance, groceries, student loan payments, utilities should be subtracted. Then calculate the amount left for the payment of debts. If it is a small amount, one should consider ways to reduce the spending by carpooling and ending the cable subscription. The aim should be to save as much money as possible to be able to pay for the debts.

The next step in debt reduction is making a plan for debt reduction. Continue the debt payment each month as calculated in the above steps with highest rate of interest and balance till the debt is paid.

The next step towards debt reduction is to negotiate with the creditors and lenders, and find if there is a possibility of improving the terms on the debt. The interest rate may be lowered or a reduced settlement may be negotiated. One can consider transferring credit card debts so as to get lower interest rates. To prevent damage to the credit score, one should keep the balance of the credit card below 35%. One can also consider consolidation of debts into loans – personal or home equity.

Finally, one should follow the above course of action each month and keep a record of the progress before one is free from debts.