Paying Off Your Debt The Easiest Way

A major problem for many people nowadays is that it is easy to know that you have a debt problem but very to know precisely how large the problem is. In fact you could be surprised to find that a very significant proportion of those people with a debt problem do not have any idea how much they owe or how much in total they are paying out in interest charges on their loans each month. So, the first job in sorting out your debt is to work out precisely how large the problem is.

Write down all the debts which you currently have, noting down how much of the original debt remains outstanding and how much you are having to pay each month. You also need to separate out every payment to see how much of the payment represents a repayment of the original loan and how much is merely interest.

You may well be taken aback by what you discover, not only in terms of how much money you owe, but in terms of how much of your monthly income is simply being used to meet interest payments. For example, if you earn $4,000 a month and are having to pay $400 each month simply in interest charges then this means that you are paying out 10% of your monthly income without reducing the total amount you owe. If this sounds bad enough, then take it one stage further. If $400 is the maximum you can afford to pay out each month then you can continue paying this sum for years without your debt going down at all.

With a bit of luck the balance between the sum that you are having to pay in interest charges and the sum being used to repay your original loans will be reasonable and it is difficult to quantify just what this should be as it will change from one loan to another. For example, in a typical home loan it is not unreasonable to be paying 90% interest and 10% principle in the starting years of a mortgage, but you assuredly do not want to be doing this with your credit card debt.

Once you have discovered the extent of the problem the next thing you need to do is to construct a plan to pay down your debt as quickly as you can. For this you are going to need to calculate how much in total you can afford to pay each month and then work out how this sum should be applied to your various debts.

One possible solution is sometimes referred to as the ’snowball’ method and involves clearing your smaller debts. You will then have more money available to pay off your other debts and can progressively work your way up to your largest debt.

A second solution to the problem is to tackle the largest debt initially and thus save the greatest amount of money in in essence wasted interest payments. However, this is not an easy method and progress tends to be slow making it difficult to keep to this particular plan.

Whichever course you follow you cannot just ignore one or more of your debts while paying off the others or you will run into trouble with your creditors and adversely affect what may already be a damaged credit record. If meeting at least the minimum payment on all your debts then you must talk to the lenders in question and see whether they can assist. Almost all lenders will have a debt reduction settlement program and they will normally agree to help you by accepting lower payments for a short period of time, or even to waive your payments for a couple of months, as long as you explain your situation to them.

If you find yourself in a mess and are trying to figure out how to get out of debt then do not make things even worse than they already are by taking on more debt. This might seem to be obvious but you would be surprised by how many people try to borrow their way back into the black. This does not work and simply makes a bad situation far worse.

TheDebtAssistanceCenter.com provides all types of debt assistance including such things as handling bankruptcy questions

Paying Off Your Debt The Easiest Way / Author: Donald Saunders

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