Many people find themselves way over their heads in debt these days. Between credit cards, house payments, and car payments, the interest accrued can really bury a person. There are a few different ways to get out of debt and repair your credit without resorting to filing for “bankruptcy”.
Try working with a debt consolidator. This is where you hire someone from a company to talk to your creditors and make your payments for you. The drawback with this is, you have to turn over your paycheck to the consolidator, and make payments on your debts. They will send you a check for the difference. Basically, you get an allowance from your paycheck from them. If you are one who cannot budget or talk to creditors for whatever reason, this could be a good way to go for you. However, if you’re not afraid of talking to your creditors and negotiating a payment plan that you and the creditor can live with, here are some things you can do.
First off, you need to sit down with all of your bills. Sort through them and decide which ones are the most important to pay first, such as house payment, car payment, groceries, utilities and insurance. Place them all in one pile, or file them by themselves. Then place credit cards and extra expense items that you pay for in another pile. If you bring home 2500 dollars every two weeks, that means you bring home 5000 dollars a month. Take your paper, pen and calculator and place that amount at the top of your page. This will start you on creating a budget. Then add up your payments that are necessary to pay each month. Subtract the total of your must haves from your total monthly take home pay.
Let’s say, as an example, that your must haves added up to 3500 dollars. Don’t forget to figure in gas to get to work, groceries for the month, your minimum utility bills, phone and insurance. This will leave you 1500 dollars to pay off your credit cards and other types of bills. Start a new column on your paper with 1500 dollars as your starting amount. Then add up how much your minimum payments are on those other bills. More than likely, if you are like most people who are in debt, even the minimum added up with all the other minimums is way more then that 1500 dollars.
This is where you must pick up a phone and call each creditor on the second set of bills and ask them the hard question, “How much must I pay to get out of debt?” Take note that in order to have them help you, you will have to agree to stop using that card, and cut it up. Your goal is to do away with the debt. If you’d like to keep one card to use for emergency expenses in the future, decide which one to keep by examining which one has the least amount of interest each month. Also look at the one that has the least amount of charges on it. This will help you decide which one to hang on to. Put that bill along with the must-have bills that need to be paid each month. You may then want to deduct that from your remaining figure of 1500 dollars, which you will use to pay off your unnecessary extra debts. If you pay 25 dollars a month on the card you decide to keep, that will leave you with 1475 dollars a month to pay off the cards you are going to do away with.
When calling your creditor, have this amount in front of you. Then explain to them the reason you fell behind on your payments. Tell your creditor how much of the debt you are currently able to cover and your plans for paying off the debt in the long-term. You should include the amount you will be able to pay each month and what your other obligations are, such as what mandatory bills (house, car, phone, etc.) must be paid every month.
Most credit card creditors are willing to give you a payoff amount and stop charging you interest on the bill if you talk to them before the bill gets out of hand or goes without payment for too long. They also seem to like the fact that you are the one calling them in order to try to get your bill paid. Be advised that not all creditors are going to be this cooperative in your dealings with them. However, the rule is that most are.
Keep an eye on your credit report. Check it at least once a year. Check for errors, debts you forgot you had, etc. Make an effort to contact the creditors that you owe, as well as the ones that made errors in your report(s). So many people’s credit ratings are needlessly low because the credit reporting companies put the wrong information on people’s reports.
Remember, only you can make sure your credit is good. You are the only one who will care if it is good or not. If you do not keep an eye on it, no one else will.
