When debt starts piling up, it can become a cause for concern. If you’re frequently finding yourself with maxed out credit cards, lines of credit that barely get paid down, or an overabundance of various bills each month, it may be time to create a debt repayment plan.
A debt repayment plan is a service offered through a credit counselling agency that helps you map out a way to repay your debts in full over a period of time. The agency will deal with your creditors on your behalf and negotiate a repayment plan that satisfies both you and the creditor.
In order to create a debt repayment plan, you’ll first need to get professional help from a credit counselling agency that has the expertise necessary to deliver a manageable repayment schedule through a complete analysis of your financial situation.
Your credit counsellor will first identify how much debt you actually have. Although it may seem scary to look at the numbers, this step is vital in order to be able to develop a reasonable plan. You’ll need to bring all your debt information, including current balances, interest rates, and minimum monthly payments and who you owe.
The minimum monthly amounts may not be much, but that is what you have to pay each month with no exceptions. If you are able to negotiate better interest rates with your creditors, you will have one smaller and more affordable amount to pay each month.
The next step is adding an affordable amount of money to your monthly minimum payments. You will use this amount to put towards the loan with the highest interest rate. Since this loan is the most expensive, allotting more money towards it will allow you to pay it down faster, thus saving you more money in the long run.
How to Stick to Your Debt Repayment Plan
The best way to stick with your debt repayment plan is to prioritize your expenses and understand your budget. Any money that you have left over each month after paying monthly expenses is what you have to repay your debt. Without a budget, you cannot know how much money is available to put towards debt.
Your monthly expenses need to be as clear and well organized as your debt payments. Put your debt repayments and expenses together and deduct the entire sum from your income. What you get is what you spend. Not a cent more!
You may have to implement some lifestyle changes for you and your family. You will have to carefully analyze how and why you may be in the red each month. It is important that you are aware of your expensive habits and that you refrain from overspending. It’s not easy; while it may take a lot of discipline, everyone can become debt free if they commit to their debt repayment plan.
A credit counselling agency can help you develop a realistic plan that right for you. Contact us today for a free consultation.