Four Ways to Pay Down Debt that Isn’t Going Away

Many people the world over find themselves swimming in debt. Even worse, several of them have no clue of how they’re ever going to repay these debts. In some cases, debt can be necessary – for instance, when you’re buying a home. However, debt also tends to stick around. By doing so, it often makes things more difficult than they would otherwise be. In addition, debt can increase stress levels too, thereby leading to serious medical conditions such as depression, anxiety, migraines etc. Repaying your debts can seem difficult at times. Yet, it remains crucial towards achieving financial freedom. If you feel that you’re on the road to bankruptcy, consider the debt solutions that follow to turn your finances around.

Formulate a Personal Budget and Debt Repayment Plan

Borrowers often underestimate the power of making and following personal budgets or spending plans. Making a personal budget can help you focus your money towards repaying your debts. And, making a budget isn’t very difficult either. Compile a detailed list of your expenses and earnings to create a balanced budget. Thereafter, try to create a surplus amount by:

Reducing your expenses in some areas e.g. reducing your cable television package, cutting down on your unnecessary expenses etc. and,
Augmenting your earnings by working a double shift, taking on a part-time job, selling some assets, or using some clever apps.

Similarly, create a personal debt repayment plan. List all the types of debt you owe – including the amount, the minimum amount payable and the interest rates applicable. Focus on repaying the debt with the highest interest rate first with the maximum amount that you can afford to pay, while making minimum payments on the other debts. Alternatively, repay the debts based on the balances owed by repaying the loan with the lowest balance first, while making minimum payments on the others. Follow this process until you become debt-free.

Consolidate All Your Debts into a Single New Loan

Debt consolidation involves paying off several smaller loans with a single larger loan. The amount borrowed on the new loan will be the same as the total debt owed. But, the consolidated loan will feature lower interest rates than the smaller loans. Moreover, the term on the consolidated loan will be longer as well. Hence, the amount you need to pay back each month will also be relatively lower. Consolidation loans enable you to manage your debt more easily. So, instead of keeping track of five loans payable to five borrowers with different interest rates, you will only need to repay the consolidated loan.

Consolidated loans do nothing to address the issues that got you into the debt trap in the first place. So, they will yield optimal value when you combine them with other debt solutions – such as creating and sticking to a budget. Budgeting will enable you to avoid accumulating new debt while you repay the consolidation loan. It will also help you save some more money. Thus, if you can control your spending, your consolidation loan will help you take control of your debt and manage it in an easier manner.

How Does Credit or Debt Counselling Work?

Not everyone can get their budgets to balance. These individuals will require some guidance or assistance with their debt. Credit counsellors could be the best professionals to consult in this scenario. These professionals can help you make budgets. In addition, they can direct you towards other debt repayment options or solutions tailored to suit your specific situation. Credit counsellors help borrowers ascertain the best debt repayment programs available by:

– Assessing their debt situation comprehensively with the help of sound debt repayment calculators
– Evaluating the assets available and,

Providing debt remedies that:

  • Help borrowers get on with their lives with an acceptable standard of living even as they continue repaying their debts
  • Prevent the repossession of assets (if applicable and possible)
  • Rehabilitate borrowers without detriment and, Are acceptable to the creditors involved including debt management programs, debt consolidation loans, debt settlement, bankruptcy etc.

Credit counsellors can prepare debt management plans that enable you to repay your debts over a span of three to five years. Once the creditors accept the proposed plan, you will make a single payment to the credit counselling agency each month. Debt management programs do not erase any of your debts. But, the interest relief they offer could help you to repay your debts relatively faster.

Debt Settlement – An Effective Alternative to Bankruptcy

Debt settlement denotes a process where you (or a professional on your behalf) offer reduced debt repayment to your creditors. In many cases, this will be in the form of a lump sum payment to the creditors. For this reason, debt settlement suits people with funds on hand. The arrangement enables you to repay your debts quickly. In many cases, you will be able to repay your debt at a reduced amount instead of having to repay the entire amount you owe. Debt settlements denote informal arrangements made with creditors. Consequently, the arrangements might not feature any guarantees.

You could consider using the services of some debt settlement companies. The debt settlement company will provide an estimate for reducing your debt along with a new, lower monthly payment. You will send the payments to the company instead of the creditors. The company will deposit these payments into a savings account. Once the account contains a specific amount of funds, the debt settlement company will negotiate a settlement with your creditors. The settlement will often be lower than the full outstanding balance. When the creditors agree to the settlement amount, the settlement company will pay them and take a fee for negotiating the settlement.

However, debt settlement arrangements have a flipside too. They could affect your credit score significantly. In many cases, creditors don’t settle debts until they’re some months after their payment due dates. For this, you’ll need to stop paying your creditors and let your debts become past due. Once your creditors report your late payments to the credit bureaus, your credit score will drop. These late payments will remain on your credit history for as long as seven years or so – regardless of the debt settlement action so you won’t be able to obtain new credit cards and loans until you accumulate a positive credit score. Therefore, bear this in mind before you decide on a debt settlement.

It is recommended that you speak with a licensed bankruptcy trustee or a non-profit credit counselor about your specific situation before making any big decisions concerning your debt. If you are burdened by debt, the strategy you chose and the consistency in which you follow it will be critical to your financial future.


Gordon Sands is an experienced financial writer, and president of Having worked alongside his father for over 8 years in the bankruptcy field, Gordon Sands has written numerous articles about debt relief and money management in hopes of helping readers take back control of their finances and lives.

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