There are a lot of reasons people end up falling deep into debt. The loss of a job, a medical emergency, a divorce, career change, or some other personal emergency cause your finances to change and things that were once affordable (car loan, credit cards, student loans, mortgage, etc.) are now a burden. You start making late payments, taking from one account to cover the other, and before you know it your accounts have been turned over to collections and you’re facing a plethora of negative consequences.
Ignoring the matter will only cause things to get worse. Though it may seem like there is no end in sight, there are plenty of consumers who have dug themselves out of a hole totaling tens of thousands of dollars. The solution? Get serious about your finances and come up with a debt repayment plan.
What is a Debt Repayment Plan?
A debt repayment plan is a personal strategy on how you’ll start paying off your debt. Based on your current income and the debts you have you work to find a solution that will allow you to settle the accounts in full over the shortest period of time. Once you’ve got an idea of what you can afford each pay cycle or month, you contact the creditors to see if they have an option that would work for your budget. Here are some tips for making the most efficient plan.
- Know where you stand – the first bit of advice is to have a clear understanding of where you stand. Get your credit report, account statements, and other documentation necessary to calculate your total debt.
- Know what you can afford – review your current budget. After paying for all necessities, how much money do you have left to commit to paying down your debts?
- Contact Companies – you now know what you can afford to pay each month to get the balance paid in full. So, you should start contacting creditors and lenders to find out what options they have available to you. Some suggestions might be to request a lower interest rate or to have late fees and collection costs reduced. If someone is willing to give you a settlement offer, you might consider filling out a cash loan application online to see if you can get the funds you need upfront. This would resolve the account and improve your credit right away while you pay back the loan in smaller installments.
- Get the plan in writing and stick to it – after negotiating with creditors and lenders make sure that you request the debt repayment plan in writing for your records. Be sure that you are ready to start making payments on the day you specified and stick with it until the balance has been paid in full. Failure to stick to a repayment plan that you agreed to may make things worse in the long run.
When you’re dealing with a serious amount of debt, doing nothing is the wrong answer. The best option is to come up with your own debt repayment plan and reach out to creditors for negotiations. As they want to get the matter resolved, they are highly likely to work with you to find a feasible solution. Whether that means paying a lesser amount to settle or breaking your debt up into small monthly payments over a period of time, make sure that you get the agreement in writing and stick to your end of the bargain. It could take several months or years depending on how much debt you’re dealing with, but having a debt repayment plan is often the wisest way to become debt-free.