Debt Management Guidelines That Will Help You Control Your Debt

by Guest on December 19, 2012

Debt management does not have to be scary. In fact, debt does not need to be scary, but if you have bill collectors calling you or if your bills are piling up, it can feel confusing and scary. When you use the right management techniques for your debt, you can regain control and even save a little money.

Debt Reduction Strategies That Help You Save

Ideally, you should devote as much money as possible to debt reduction. If you can afford to cancel the cable or reduce how much you eat out, you need to devote this money to reducing your debts. When paying off debt, it is critical that you devote the most money to the debts with the highest interest rates. You should send every creditor the minimum payment, and you should send the leftover money to the creditor who is charging you the most interest. Once they have been paid in full, you can devote the extra money to the creditor with the second highest interest rate.

Saving Versus Paying Off Debt

One of the most important things to consider when creating a debt management strategy is whether or not you should still save money. Ideally, you should not save money if it is collecting a lower interest rate than you are being charged on your debts. Thus, if your savings account has a 2% interest rate but your credit card is charging you 29%, it makes more sense to pay off debt than to save. On the other hand, if your employer matches your 401K contributions, that is essentially a 100% return on your investment immediately. In that case, you should save instead of paying down debt.

Selecting a Debt Management Program

If you have excessive debts, you may struggle to pay them on your own. Luckily, there are many different types of programs to help you manage your debt. A consolidation loan is typically the best way to save money on interest. You can get these loans from a bank, a credit union, or a high risk lender. In most cases, you will need a cosigner. Once you have been approved, you will use the consolidation loan to pay off your current debts. Then, you will only have one payment with a lower interest rate.

Alternatively, you may use a program like Consumer Credit Counseling. These places pay your bills for you, and you just have to pay them a small monthly fee. They may also be able to negotiate lower interest rates with your creditors. Debt settlement companies are popular with many debtors. Under a debt settlement program, the debtor saves cash while virtually ignoring their creditors. Eventually, the creditors will offer a settlement, which allows the debtor to pay off their debts for less than they owe.

Debt management does not have to be scary. You are not alone, and there are multiple services out there to help you. The type of debt management program that you ultimately select will depend upon your personal financial goals. If you decide to manage your own debt, it is important to keep in mind the guidelines about paying off high interest loans first and only saving when the return on your savings is going to be bigger than the interest rate on your loans.

This guest post was provided by, the debt management experts specializing in debt consolidation, debt relief, credit repair, tax debt, debt settlement and more.

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