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Creating a debt repayment plan will enable you to map out a way to pay off your debt in a way that is achievable, based on your budget, and aggressive enough to pay off the debt on a specific timeline. You can create your repayment plan or work with a professional who will work with you on a plan to get caught up.<\/p>\n\n

The Importance of Having a Plan<\/h2>\n\n
There are numerous benefits to a debt repayment plan, but the most crucial reason to have one is that it will help you save money. It may also speed up the amount of time it takes you to pay off your debt and help you start on the path to rebuilding your credit. A debt repayment plan can also help you to stay on task, working towards specific goals to pay off debt and free up your finances.<\/p>\n\n

Understanding Your Debt<\/h2>\n\n
The first step is to understand what your debt is. That may seem simple, but do you know how much credit card debt you have? How much do you owe other lenders?<\/p>\n\n
Make a list of all of your debts. You need to be able to see all of your debts at one time. Write down:<\/p>\n\n
\n\t
The name of the company<\/li>\n\t
The minimum payment you have to make<\/li>\n\t
Your current balance<\/li>\n\t
The interest rate you are paying<\/li>\n\t
The date payments are due<\/li>\n\t
Any incentives for paying off the debt early (such as being able to avoid finance charges)<\/li>\n<\/ul>\n\n
Be sure to include all debt, including:<\/p>\n\n
\n\t
Credit cards<\/li>\n\t
Mortgages<\/li>\n\t
Car loans<\/li>\n\t
Personal loans<\/li>\n\t
Medical bills<\/li>\n<\/ul>\n\n
You can write this information down on paper or use a spreadsheet online. The goal is to organize it to make it easy to read so you can refer to it numerous times.<\/p>\n\n
Evaluating Your Financial Situation<\/h2>\n\n
Now that you know how much debt you have, the next step is to determine what your debt load is. You need to understand how much debt you have compared to your income. Your debt-to-income ratio can help you better understand if you can repay your debt and what steps to take to pay it off.<\/p>\n\n
In short, you\u2019ll want to calculate your current debt by adding up all your debt. Then, divide that by your annual income; the lower this number, the better.<\/p>\n\n
Choosing a Debt Repayment Strategy<\/h2>\n\n
Anything over 30% means it\u2019s time to get to work to pay down your debt. There are numerous strategies available that could help you. Please don\u2019t get too hung up on which strategy is the best but instead, choose one that seems to apply to your situation and put it into place. Speed and consistency matter here.<\/p>\n\n
\n\t
Debt snowball method: In this method, you start with the smallest balance you owe. You pay as much as possible towards that small monthly balance until paid. Then, you take the amount you were paying on that debt and apply it to the next smallest debt. Each time you pay off the debt, you can put more towards the next debt.<\/li>\n\t
Debt avalanche method: If you want to pay the least money to pay off your debt, use this method. You will put any extra money towards your debt with the highest interest rate. Continue paying your other debts, but make minimum payments there. After you pay off the first debt with the highest rate, move on to the next one.<\/li>\n<\/ul>\n\n
Some people may consider debt consolidation as an option. Look for an organization that can help you to structure a payment plan if you cannot do so yourself. However, either of the methods above can help you maintain your credit score while paying down your debt. That\u2019s not always possible with consolidation programs.<\/p>\n\n
Setting Goals and Milestones<\/h2>\n\n
Set some goals for yourself. Here are a few things to keep in mind:<\/p>\n\n
\n\t
Stop using credit. The only way to pay off what you owe is to stop building it in the first place. Make it a goal that every purchase will use cash from your bank account.<\/li>\n\t
Aim to pay off your first debt within as little time as possible. It creates a sense of accomplishment and helps you to stay on the path when you go this route.<\/li>\n\t
If you\u2019re visual, create a chart for yourself. Document each card paid off and the balance of your existing debts as you do.<\/li>\n\t
Incorporate a savings goal into your budget. Savings can help you avoid having to use credit in the future.<\/li>\n\t
Always work to find ways to lower your expenses. Paying less for something saves you money.<\/li>\n<\/ul>\n\n
Sticking to Your Plan<\/h2>\n\n
The secret to success with a debt repayment plan is working it. If you want to reach your goals, you must put in the time to make that possible. Consistency is a big part of that. Once you have a plan, avoid deviations from it.<\/p>\n\n
It is hard work and takes time. Yet, the payoff is well worth it as you\u2019ll have the financial confidence to build wealth that lasts your future. Even if you can only make a small payment, that\u2019s all it takes.<\/p>\n"},"library":"H5P.AdvancedText 1.1","metadata":{"contentType":"Text","license":"U","title":"Untitled Text"},"subContentId":"a7ec80f5-648a-4c14-970f-9b9a4d829870"}}]},"library":"H5P.Column 1.16","subContentId":"c7cd921b-24d0-4a1e-8741-370a45de044b","metadata":{"contentType":"Column","license":"U","title":"Putting Together a Debt Repayment Plan"}},{"params":{"content":[{"content":{"params":{"text":"
Most credit cards have a minimum payment requirement, the least you must pay to keep the account in good standing. Paying more is always an option, but paying less would mean fees and a strike on your credit report. It's always wise to pay at least the minimum before the due date, but it's best to pay more.<\/p>\n\n
What Are Minimum Payments?<\/h2>\n\n
A minimum payment is generally calculated based on a flat percentage of your total balance. Some credit card companies will add any new interest and fees and past due amounts to the minimum payment requirements.<\/p>\n\n
Some credit card companies require you to pay a fixed amount that stays the same each month; others base it on your current balance. It would be best to learn about these requirements before you open an account.<\/p>\n\n
You can learn your minimum payment for any account you have by looking at your statement or logging into your account. Doing so will allow you to see what the lender requires in payment from you this month.<\/p>\n\n
The Cost of Making Only Minimum Payments<\/h2>\n\n
The higher your credit card balance, the higher your minimum payment is. However, even if that payment looks pretty high, it's tough to get ahead on paying off your debt if you only make this payment. If you pay only the minimum payment, it will take you years to pay off the debt.<\/p>\n\n
A minimum payment warning is likely on your statement, for example. That will include a table or chart showing how long it will take to pay your debt off based on your payment. The more you pay, the sooner you pay off your debt and the more money you save.<\/p>\n\n
The longer you hold onto the debt, the more interest you pay over the loan term. That increases your costs even if you do not buy anything else. However, if you paid twice your minimum monthly payment, you could cut the time to pay off your debt in half. As a result, you'll pay less interest over the pay-off term, which goes straight to your bottom line.<\/p>\n\n
Staying Out of the Cycle of Debt<\/h2>\n\n
The cycle of debt is problematic.<\/p>\n\n
\n\t
You make a credit card purchase, planning to pay it off quickly.
\n\tYou don't do that, and interest rates apply.<\/li>\n\t
You make the minimum payment on the debt. Still, your balance drops a small amount because most of your minimum payment goes to pay interest on the debt.<\/li>\n\t
You pay only the minimum payment again and again. Yet your debt balance never seems to go down by much.<\/li>\n<\/ul>\n\n
The best way to stay out of the cycle of debt is to make payments on time to avoid fees, to limit how much credit you use, and to pay more than the minimum \u2013 as much as you can \u2013 from month-to-month.<\/p>\n\n
Tips for Paying Off Debt<\/h2>\n\n
How can you effectively pay off your debt and break free from the cycle of debt? Take into account these valuable tips:<\/p>\n\n
\n\t
Keep track of all your expenses: Understanding how much you're spending is crucial. By documenting all your expenditures, you can identify areas where you can cut back and save money.<\/li>\n\t
Make informed purchasing decisions: Whenever you make a purchase, strive to make the best possible choice. That involves ensuring you get the best price and actively seeking ways to reduce expenses.<\/li>\n\t
Build an emergency fund: Setting aside money in an emergency account is essential. That ensures that you have a financial buffer in case of unexpected circumstances, allowing you to avoid relying on credit during emergencies.<\/li>\n<\/ul>\n\n
Creating a Debt Repayment Plan<\/h2>\n\n
A debt repayment plan is a tool that can help you create a map to help you know how much you should pay on your debt, one step at a time. Most people will find that debt repayment plans \u2013 like the debt snowball method \u2013 help you to focus on using your money wisely while also allowing you to meet your financial obligations.<\/p>\n\n
The basics start with a budget. Then, determine which account to tackle first with the most \"extra\" you can, over and above the minimum payment. Doing this helps to reduce your costs over the long term and helps you to get out of debt sooner.<\/p>\n"},"library":"H5P.AdvancedText 1.1","metadata":{"contentType":"Text","license":"U","title":"Untitled Text"},"subContentId":"0ed057f8-b51b-4af7-b70d-bd6ed4d86c1f"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"4f896912-9ee2-4707-b524-42306f2b95d7","metadata":{"contentType":"Column","license":"U","title":"Making Only Minimum Payments"}},{"params":{"content":[{"content":{"params":{"visuals":{"fit":true,"controls":true},"playback":{"autoplay":false,"loop":false},"l10n":{"name":"Video","loading":"Video player loading...","noPlayers":"Found no video players that supports the given video format.","noSources":"Video is missing sources.","aborted":"Media playback has been aborted.","networkFailure":"Network failure.","cannotDecode":"Unable to decode media.","formatNotSupported":"Video format not supported.","mediaEncrypted":"Media encrypted.","unknownError":"Unknown error.","invalidYtId":"Invalid YouTube ID.","unknownYtId":"Unable to find video with the given YouTube ID.","restrictedYt":"The owner of this video does not allow it to be embedded."},"sources":[{"path":"https:\/\/vimeo.com\/862694838\/acc72f3bef?share=copy","mime":"video\/unknown","copyright":{"license":"U"}}]},"library":"H5P.Video 1.6","metadata":{"contentType":"Video","license":"U","title":"The Avalanche Debt Repayment Method"},"subContentId":"c30daf10-f292-45a0-b24e-184fcd5c47ba"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"4c80be9d-3440-48bc-a6dc-5073f781acc6","metadata":{"contentType":"Column","license":"U","title":"The Avalanche Debt Repayment Method"}},{"params":{"content":[{"content":{"params":{"visuals":{"fit":true,"controls":true},"playback":{"autoplay":false,"loop":false},"l10n":{"name":"Video","loading":"Video player loading...","noPlayers":"Found no video players that supports the given video format.","noSources":"Video is missing sources.","aborted":"Media playback has been aborted.","networkFailure":"Network failure.","cannotDecode":"Unable to decode media.","formatNotSupported":"Video format not supported.","mediaEncrypted":"Media encrypted.","unknownError":"Unknown error.","invalidYtId":"Invalid YouTube ID.","unknownYtId":"Unable to find video with the given YouTube ID.","restrictedYt":"The owner of this video does not allow it to be embedded."},"sources":[{"path":"https:\/\/vimeo.com\/864853620?share=copy","mime":"video\/unknown","copyright":{"license":"U"}}]},"library":"H5P.Video 1.6","metadata":{"contentType":"Video","license":"U","title":"The Debt Snowball Repayment Method"},"subContentId":"77fe130a-e4e8-4c97-a8ab-c2512aafbfb2"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"5df34191-3eac-42b1-ba30-2ac56058e19a","metadata":{"contentType":"Column","license":"U","title":"The Debt Snowball Repayment Method"}},{"params":{"content":[{"content":{"params":{"resizeSupported":true,"width":"100%","source":"https:\/\/calculators.fintactix.com\/iknowfi\/module21\/m21c1"},"library":"H5P.IFrameEmbed 1.0","metadata":{"contentType":"Iframe Embedder","license":"U","title":"Understanding Biweekly Payments"},"subContentId":"08ff8d85-90c6-4a8e-b68e-dbc5abe949c6"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"0c9d7e3e-4f6f-4ee2-83a5-1b77cf601f21","metadata":{"contentType":"Column","license":"U","title":"Understanding Biweekly Payments"}},{"params":{"content":[{"content":{"params":{"resizeSupported":true,"width":"100%","source":"https:\/\/calculators.fintactix.com\/iknowfi\/module21\/m21c2"},"library":"H5P.IFrameEmbed 1.0","metadata":{"contentType":"Iframe Embedder","license":"U","title":"The Impact of Lump Sum Payments"},"subContentId":"14bd2207-4299-4747-a149-768c5277cd3f"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"5c521ec0-5c57-4169-bc99-d6ef07118a12","metadata":{"contentType":"Column","license":"U","title":"The Impact of Lump Sum Payments"}},{"params":{"content":[{"content":{"params":{"resizeSupported":true,"width":"100%","source":"https:\/\/calculators.fintactix.com\/iknowfi\/module21\/m21c3"},"library":"H5P.IFrameEmbed 1.0","metadata":{"contentType":"Iframe Embedder","license":"U","title":"Adding to Your Monthly Payment"},"subContentId":"df5f0d36-8a65-43a9-a35f-03358b543384"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"2c0af038-e4f2-47c1-8c31-6fe277d81b8c","metadata":{"contentType":"Column","license":"U","title":"Adding to Your Monthly Payment"}},{"params":{"content":[{"content":{"params":{"text":"
In today's fast-paced world, financial burdens and multiple debts can easily overwhelm individuals and families. Juggling interest rates, due dates, and payment amounts can be stressful and financially draining. However, there is a solution that can help simplify your financial situation and put you on the path to debt-free living: debt consolidation.<\/p>\n\n
What Is Debt Consolidation?<\/h2>\n\n
Debt consolidation combines multiple consumer debts into a single loan or credit line. It involves taking out a new loan or opening a new credit account to pay off debts, such as credit card balances, personal loans, or medical bills. By consolidating these debts, individuals can simplify their repayment process and potentially obtain more favorable terms, such as a lower interest rate or a more extended repayment period. This approach aims to make managing debts more manageable and affordable, allowing individuals to streamline their finances and work toward becoming debt-free.<\/p>\n\n
Types of Debt Consolidation<\/h2>\n\n
Consider the various debt consolidation options to determine if they meet your financial needs. If you qualify for any of these \u2013 and the interest rate and terms are affordable \u2013 then you may wish to consider consolidating. You may not need to consolidate if you can pay off all of your debt right now. However, debt consolidation can be highly effective and worthwhile for those struggling to get caught up and make only monthly minimum payments.<\/p>\n\n
Balance Transfer Credit Cards<\/h2>\n\n
One of the options that may be available to those with good or better credit is a balance transfer credit card. In this method, you obtain one new credit card with a larger credit limit and then use that balance to pay off other credit cards.<\/p>\n\n
Let's look at an example:<\/p>\n\n
\n\t
You apply for a balance transfer credit card and merit a $2,000 limit.
\n\tThe card sends a check to your other three credit cards to pay off their balances: $400, $500, and $800.<\/li>\n\t
You now owe nothing on those three credit cards and have a $1,700 balance on the new credit card.<\/li>\n<\/ul>\n\n
A balance transfer credit card can be very beneficial if it offers a 0% introductory period (where you do not have to pay interest for a set number of months on the balance) and has an interest rate that is the same or lower than what you are paying now.<\/p>\n\n
Personal Loans<\/h3>\n\n
A personal loan is an unsecured loan that doesn't require collateral. For example, you can use a personal loan to borrow funds to pay off your debts, and you then have one personal loan to pay back.<\/p>\n\n
Personal loans can be hard to obtain with a lower credit score. They can also be available on a limited basis to those who may have low income or a lot of debt. However, if you qualify, they can help you wrap all of your debt into a single payment, making it far more affordable to repay over time.<\/p>\n\n
Home Equity Loans<\/h3>\n\n
A home equity loan uses the equity in your home to pay off your debt. Here's how it may work. If you own a home worth $200,000 and have a loan on it for $150,000, that means you have up to $50,000 in equity. You can take out a home equity loan \u2013 a second mortgage \u2013 on the home for the equity and use those funds to pay off your debt.<\/p>\n\n
A second mortgage is a good option for many people because it has a much lower interest rate than what you may be paying on your current credit cards. However, you must realize you are putting much more at risk here. If you default on the mortgage loan, including the home equity loan, that could mean that your home goes to foreclosure. Only use this method if you can afford your home equity loan's payment.<\/p>\n\n
Cash-Out Mortgage Refinancing<\/h3>\n\n
A cash-out mortgage refinancing also uses the equity in your home but in a different way. Here, you will obtain a new loan. The new mortgage loan pays off the existing mortgage loan and will pay off your credit cards. That allows you to tap into much more affordable mortgage loan rates.<\/p>\n\n
However, the same risk applies here as with a home equity loan. You are putting your home at risk if you default on the mortgage. It would be best to ensure your monthly payment is affordable.<\/p>\n\n
Benefits of Debt Consolidation<\/h2>\n\n
Debt consolidation can offer numerous benefits:<\/p>\n\n
\n\t
It enables you to have just one loan to pay each month instead of numerous. That may mean you're less likely to forget to make the payment.<\/li>\n\t
Your debt consolidation loan may have a lower interest rate than what you are paying now on your debt, saving you money.<\/li>\n\t
You can often pay more than the monthly minimum payment on a debt consolidation loan (which may mean paying off the debt faster). This, too, could save you money.<\/li>\n<\/ul>\n\n
Risks of Debt Consolidation<\/h2>\n\n
There are risks associated with these loans:<\/p>\n\n
\n\t
You are taking on more debt. If you repay your existing loan and then use your credit cards again, you could double the debt you must repay (don't use those credit cards once you've paid them off).<\/li>\n\t
There's the risk of foreclosure if you fail to pay mortgage loans.<\/li>\n<\/ul>\n\n
Making a Debt Consolidation Decision<\/h2>\n\n
Ultimately, it is up to you to determine if a debt consolidation loan is the best path for you. Many consumers find this method highly beneficial because it enables them to pay more towards their monthly debt instead of making just the minimum payment. If you qualify for these loans, they are an excellent choice for getting back on track financially.<\/p>\n"},"library":"H5P.AdvancedText 1.1","metadata":{"contentType":"Text","license":"U","title":"Untitled Text"},"subContentId":"57f00eb5-6b92-4f0f-b71f-7e77b4503188"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"459d6a35-3a0a-4af9-8efc-d52040f7bc1f","metadata":{"contentType":"Column","license":"U","title":"Debt Consolidation Basics"}},{"params":{"content":[{"content":{"params":{"text":"
One way to consolidate debt is to use a credit card balance transfer. This method allows you to transfer the balance of existing credit cards to a new one, lowering your overall costs, combining numerous payments into one, and often building your credit back up. Balance transfers are one type of debt repayment strategy that, if available, may help you build your financial well-being in the short term.<\/p>\n\n
What Is a Credit Card Balance Transfer?<\/h2>\n\n
A credit card balance transfer is the process of opening a new line of credit (or using an existing one with an available balance) and using that available balance to pay down other debts. Moving existing debts from one account to the next may be beneficial in consolidating your debt into one place.<\/p>\n\n
This type of balance transfer is often available as a benefit to opening a new account. For example, a lender may agree to provide you with a $2,000 credit limit if you transfer some of your existing credit cards to this new line of credit, paying off the debt.<\/p>\n\n
How Does a Credit Card Balance Transfer Work?<\/h2>\n\n
Let's consider a scenario where you currently have three credit cards with varying balances and minimum payments:<\/p>\n\n
\n\t
Credit Card 1: You owe $300 with a minimum payment of $20 per month.<\/li>\n\t
Credit Card 2: You owe $500 with a minimum payment of $30 per month.<\/li>\n\t
Credit Card 3: You owe $900 with a monthly payment of $60.<\/li>\n<\/ul>\n\n
Your debt amounts to $1,700, and your combined monthly payments for these three cards equal $110. To address this situation, you approach a new credit card lender and request a higher credit limit account. Fortunately, they approve your request, allowing you to transfer the balances from the three existing credit cards to the new card. Consequently, your original credit cards have zero balances, and you now possess a single new credit card with a credit limit of $2,000.<\/p>\n\n
With the consolidation, your new credit card carries a balance of $1,700. The new lender requires a monthly payment of $90, resulting in some savings compared to the previous combined payments. This consolidation simplifies your financial obligations by reducing them to a single monthly payment. It's important to note that the specific terms and conditions may vary depending on your unique circumstances and credit qualifications. Additionally, consolidating debts may not always be advantageous, so evaluating your situation is crucial before proceeding.<\/p>\n\n
Benefits<\/h2>\n\n
A balance transfer credit card has potential benefits that make it a worthy choice for many people.<\/p>\n\n
\n\t
Interest rates: Your new credit card could have an interest rate lower than what you pay on your other debts. That means you are paying less over time.<\/li>\n\t
Minimum payments: Your minimum payment could be lower (though that's not always true). That could mean you can pay more than the minimum monthly payment to get your debt caught up.<\/li>\n\t
Credit improvement: You now have more available credit, which means you have a lower credit utilization ratio. That could improve your credit score over time.<\/li>\n\t
One payment: You only have to make one monthly payment. That may help you to minimize the risk of missing a payment.<\/li>\n\t
Different terms: You can move your debt to a credit card with better terms, like no annual or lower fees.<\/li>\n<\/ul>\n\n
Drawbacks<\/h2>\n\n
There are a few drawbacks that you should consider if you are considering balance transfer credit cards:<\/p>\n\n
\n\t
Fees: There may be some fees associated with the balance transfer. If so, that can add to the overall cost you end up paying. Sometimes, this could mean a 5 to 10% fee on top of what you are already paying.<\/li>\n\t
Extended debt: A big concern is what happens once you pay off those credit cards. If you use them, you will have extended your debt even further, meaning you could put yourself into twice as much debt as you have now.<\/li>\n\t
Hard to get: Not all lenders offer balance transfer credit cards, and some that do only do so to people who are well qualified for them. If you don't have good credit, you may not qualify.<\/li>\n<\/ul>\n\n
Completing a Credit Card Balance Transfer<\/h2>\n\n
Here's what you can expect from the process:<\/p>\n\n
\n\t
Apply for the new credit line. The lender may offer key opportunities like a 0% APR on balance transfers or no fees for a specific time. Let the lender know when you are applying that you plan to transfer balances.<\/li>\n\t
Initiate the balance transfer. That typically is done online or over the phone. Still, you must provide some basic information about the accounts to make it happen.<\/li>\n\t
Watch for it to go through. That could take a few days or longer to complete the transaction, but you should be able to see your existing balances drop to zero.<\/li>\n\t
Pay down what you owe. Set up payments on your new account and make payments. Avoid using your other credit cards.<\/li>\n<\/ul>\n\n
Alternatives to Credit Card Balance Transfers<\/h2>\n\n
You can qualify for other types of loans and debt consolidation tools if you do not qualify for balance transfer credit cards. That may include personal loans as well as home equity loans. Mortgage refinancing may also allow you to take some cash out of the equity in your home to pay down the debt you owe. Talk to your lender about the options that may fit your specific situation.<\/p>\n"},"library":"H5P.AdvancedText 1.1","metadata":{"contentType":"Text","license":"U","title":"Untitled Text"},"subContentId":"178611e4-52fc-4cfe-9d2c-15baf6d81ba1"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"1fe4b0b9-ec1d-42a3-8401-49a145984ccf","metadata":{"contentType":"Column","license":"U","title":"Credit Card Balance Transfer Options"}},{"params":{"content":[{"content":{"params":{"text":"
Debt counseling is a valuable resource, providing crucial information and support to empower individuals to shape a more secure financial future. Recognizing when debt becomes overwhelming is essential, but finding the right path to regain financial stability can be challenging. That is where a debt counselor plays a vital role, offering guidance and assistance tailored to your specific circumstances. By seeking the expertise of a debt counselor, you can gain the tools and knowledge necessary to navigate the complexities of debt, paving the way for a more promising financial outlook.<\/p>\n\n
Signs You May Need Debt Counseling<\/h2>\n\n
Take a hard look at where you stand right now regarding your debt. Whether it has been building over time or you have received a sudden financial blow, it's easy for debt to become hard to manage overall. That is when debt counseling is so important. Some of the most common signs that debt counseling may be a benefit to you include:<\/p>\n\n
\n\t
You are making only the minimum payments on your debts. That often means your balances are not going down very much each month.<\/li>\n\t
You are making payments on time, but it's hard to do so. You have numerous credit cards and other loans; keeping track of everything is hard.<\/li>\n\t
You are behind in payments and struggling with fees. You can't get caught up, so you can avoid new debts.<\/li>\n\t
Your credit score is suffering \u2013 or you may not even know your score because you are overwhelmed by your debt.<\/li>\n\t
You have a lot of unsecured debt, like credit cards and personal loans.<\/li>\n\t
You want help getting lower payments, interest rates, or both.<\/li>\n<\/ul>\n\n
What Is Debt Counseling?<\/h2>\n\n
Debt counseling involves collaborating with a licensed and certified debt counselor, an expert in assisting individuals grappling with financial management. The primary aim of this process, also known as credit counseling, is to devise a financial plan tailored to your unique needs and lifestyle. This plan will help you eliminate debt or catch up on your outstanding payments.<\/p>\n\n
In this process, debt counselors closely engage with you to gain insights into your existing debt, its causes, and possible solutions. One of their key responsibilities is to assist you in formulating a debt management plan that aligns with your financial goals and puts you back on track.<\/p>\n\n
Occasionally, a debt counselor might suggest using a large one-time payment to settle some of your debts, typically for less than what you owe. If you follow this approach, the relevant account with that lender would be closed, and you'd need to satisfy the negotiated payment fully.<\/p>\n\n
However, many people find this approach impractical. Your debt counselor can negotiate with creditors to establish a revised repayment plan. This arrangement may persuade the lender to cease imposing excessive fees and late charges, provided you make regular payments. But bear in mind this could result in the closure of your available credit accounts.<\/p>\n\n
An alternative option is to collaborate with your debt counselor to develop a repayment strategy that doesn't necessitate negotiating with your lenders or closing accounts. In this case, your creditors continue receiving payments per the original terms, and your accounts remain active.<\/p>\n\n
How Debt Counseling Works<\/h2>\n\n
The first step in every situation is understanding where you stand financially. Your debt counselor will help you analyze where you stand and then work with you to devise a new plan.<\/p>\n\n
If you enter into a debt management plan with a debt counselor that involves contacting your lenders to work out a new repayment plan, that could impact your credit. It may lead to closing your accounts, which also could mean your credit-to-debt ratio increases. However, it will give you a clear path to getting out of debt. Your credit score may improve if you get out of that debt and work to develop better repayment habits.<\/p>\n\n
Choosing a Debt Counselor<\/h2>\n\n
You can find a debt counselor in a range of ways. It may be possible to turn to a debt counseling service locally, through a religious organization, or one of the many nonprofit organizations available nationally. Before you choose one, keep the following in mind:<\/p>\n\n
\n\t
Check online reviews. Be sure you know what they offer and the risks they present.<\/li>\n\t
Don't go with anyone that promises you great credit and does not have to pay off what you owe.<\/li>\n\t
Look at their Better Business Bureau rating.<\/li>\n<\/ul>\n\n
Tips for Success<\/h2>\n\n
If you decide to move through the debt counseling route, you'll want to understand the plan and how it impacts your goals. Then, apply these core concepts to help ensure you have success:<\/p>\n\n
\n\t
Make sure your monthly payment is always on time and done without fail. That is what is going to help you get out of debt.<\/li>\n\t
Consider working to rebuild your credit with a new credit card that has a low credit limit. Over time, that can help you rebuild your debt.<\/li>\n\t
Be sure to work to make wise financial decisions consistently. If you can pay off your debt early too. Follow your budget.<\/li>\n<\/ul>\n\n
Avoiding Debt Counseling Scams<\/h2>\n\n
There are scams out there that can cost you significantly if you do not realize what's happening. Even nonprofits will charge a fee for their service but will be open and honest about it. Any company that promises to fix your credit report or score is likely not being honest with you. If it sounds too good to be true, it probably is. Be sure to report any scam to the Federal Trade Commission.<\/p>\n"},"library":"H5P.AdvancedText 1.1","metadata":{"contentType":"Text","license":"U","title":"Untitled Text"},"subContentId":"83cf84bd-a970-4794-b20c-df82670d83d6"},"useSeparator":"auto"}]},"library":"H5P.Column 1.16","subContentId":"2c688108-73bd-4448-8d8a-cd20841c629a","metadata":{"contentType":"Column","license":"U","title":"When You Need Debt Counseling"}}],"behaviour":{"baseColor":"#002d72","defaultTableOfContents":true,"progressIndicators":true,"progressAuto":true,"displaySummary":true},"read":"Read","displayTOC":"Display 'Table of contents'","hideTOC":"Hide 'Table of contents'","nextPage":"Next page","previousPage":"Previous page","chapterCompleted":"Page completed!","partCompleted":"@pages of @total completed","incompleteChapter":"Incomplete page","navigateToTop":"Navigate to the top","markAsFinished":"I have finished this page","fullscreen":"Fullscreen","exitFullscreen":"Exit fullscreen","bookProgressSubtext":"@count of @total pages","interactionsProgressSubtext":"@count of @total interactions","submitReport":"Submit Report","restartLabel":"Restart","summaryHeader":"Summary","allInteractions":"All interactions","unansweredInteractions":"Unanswered interactions","scoreText":"@score \/ @maxscore","leftOutOfTotalCompleted":"@left of @max interactions completed","noInteractions":"No interactions","score":"Score","summaryAndSubmit":"Summary & submit","noChapterInteractionBoldText":"You have not interacted with any pages.","noChapterInteractionText":"You have to interact with at least one page before you can see the summary.","yourAnswersAreSubmittedForReview":"Your answers are submitted for review!","bookProgress":"Book progress","interactionsProgress":"Interactions progress","totalScoreLabel":"Total score","a11y":{"progress":"Page @page of @total.","menu":"Toggle navigation menu"}}