Developing a Debt Payment Program

March 18, 2010

You are an anomaly if you don’t have some sort of debt. But, that is a club that most people would rather not belong to. Do you want to get out of debt? Here is some advice on how to institute a debt payment program and find freedom.

First of all, you don’t have to use credit payment programs if you don’t want to. The truth of the matter is that you can accomplish on your own what these programs offer to do for you. They have no more leverage with the credit card companies than you do.

However, if you are the type of person who needs some sort of accountability to get going on your debt payment program, then a credit payment program will provide that service for you. Be aware though that many of these programs won’t help you unless you are already behind in your payments. Know up front what the requirements are and if you can meet them.

Before you begin your debt payment program there are a couple of things you will want to do:

  • Stop using the credit cards that are already nearing the limit. It doesn’t make good financial sense to keep using them as you are trying to pay them off.
  • Calculate your total debt amount. Know where you are starting so you can devise an adequate plan to cut it down.
  • You can start much like you would when creating a budget. You will want to have a copy of your monthly bills and your credit card statements. In fact, if you already have a budget drafted, use that to get the numbers that you need to work with.
  • After you tally up how much of your money goes to recurring bills, see what you have left. Don’t include credit card bills in with the other bills since these are the ones you want to pay off.
  • Now, your choice comes down to how you will divide that leftover money up, and where you can cut costs. You do have to grocery shop but see what you can possibly spare to put towards your credit card balances.
  • There are a couple of choices when it comes to a pay down strategy. Trying to pay an equal amount to all of your credit cards won’t get any one of them off your plate any time soon. Try this:

  • Snowball effect – Here you start with the credit card with the lowest balance and commit as much money as you can to it to pay it off. When that is done, you move to the card with the next lowest balance and so on.
  • Stacking your debt – Here, you begin with the highest interest rate credit card. Put as much money as possible towards it to get it out of the way and then move to the next highest and so on.
  • It is important to remember that you need to continue to pay the minimum on the others so they don’t go into arrears. Either plan will help you see a light at the end of the debt tunnel.

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