Step One – Consolidate Your Debt & Reduce The Interest
First, there are a number of ways to pay off high-interest loans by refinancing your existing debt into a single lump sum. There are public and private financial debt and credit consolidation services that work with your creditors for purposes of consolidating your debt and reducing the amount of your overall interest. If you own a home, they can also show you how to refinance your mortgage debt under the new foreclosure protection laws.
The process requires that you gather all of your financial information and organize it accordingly. Review and examine each of your debts to make sure the amounts owed are accurate. If you dispute a debt, let the debt counselor know the details of the dispute and why you believe you do not owe the money. The debt service will work with you and your creditors to work out an acceptable repayment-payment schedule with your creditors. Remember, the last thing creditors want to see happen is you being forced into filing for bankruptcy. In that scenario, you unsecured creditors stand a very good chance of receiving nothing.
Finally if you’re fortunate enough to have savings, consider using some or substantially all of it to pay down your existing debts. Most counselors will tell you that withdrawing savings from low-interest accounts to settle high-rate loans is the fastest path to lowering your overall debt. Once you have your debt consolidated and your overall interest rate lowered and under control, you are now ready for the hard work – lowering your monthly living expenses.
Step Two – Cut Your Existing Living Expenses
Having money troubles requires you to take a close look at your current lifestyle and the ways you spend money. First consider which of the larger living expenses you can reduce or eliminate. For this you need to examine where you live, what and where you eat, what you wear, what you drive and what you do with your time – all are choices that can have a major impact on your financial picture.
Financial recovery begins with creating a realistic spending plan called a budget. You will need to prioritize between necessary and unnecessary living expenses. The optional living expenses are usually considered discretionary spending, such as entertainment, eating out, vacation and travel.
You will need to consider eliminating as much unnecessary spending as humanly possible. Consider taking public transportation rather than making a car payment or paying the high price of fuel. Become a savvy shopper by choosing generic products rather then expensive brand name ones. If you haven’t done it already, consider charging through a debit card rather then a credit card. There is no interest rate to worry about and you will never spend more then you actually have.
Consider shopping at a dollar-store for certain shopping products. Many products including household cleaning items, snack foods, and paper products can be purchased at a fraction of the cost from most grocery chains. Also, if you or your family is in need of dental care, but do not have insurance, consider contacting a dental graduate school where they provide dental services for adults and children for no charge.
The loan of last resort is usually the loan from your local pawn dealer. When bank borrowing is not an option, online trading can be a valuable alternative for people with immediate cash needs. Some people choose to trade their personal property for cash, while others use it as collateral for a loan. Either way, the money you get from the pawnshop can help pay down your debt and help you pay your bills.
Finally, if you are in need of public assistance, there is the availability of food stamps, low-income housing, and assistance with the payment of home energy bills. You should also be familiar with the current federal consumer legislation that is designed to protect people in serious money troubles. They include the American Housing and Foreclosure Prevention Act and the Credit Card Reform Act. Both pieces of legislation are intended to protect consumers and assist them with their money troubles.