How to Create a Debt Repayment Plan

The do-it-yourself attitude has become increasingly popular throughout the United States, even making its way through debt management. Why pay for someone else to manage your finances when you may be capable of handling them on your own? If you’re interested in getting your debt paid off on your own, check out these steps in creating a custom debt repayment plan:

1. The first step in any debt repayment plan should be to make a detailed list containing all of your various debts. Credit card debt, auto loans, mortgage, and any other type of debt you might have should be included in the list. Each amount should also include the interest rate associated with it. If your debt has a maturity date or due date, such as with your auto loan, be sure to include it as well.
2. Now that you’ve got your list, it’s time to decide what needs to be paid off first so you can properly arrange your payments. In most cases, you’re going to want to start working on the largest balance with the highest interest rate first. If you’ve purchased anything, such as a computer or television, that offered no interest for a period of time, make sure you get it paid off before the no-interest-period ends. Once it ends, all of the interest you would have accumulated is added to your balance, which could easily set your debt repayment plan back several hundred dollars.
3. Next, you’ll want to call up all of your unsecured debt lenders as soon as possible. Inform them of your situation and request a lower interest rate on your debt. A lower rate means you’ll be paying less money over time and will be able to pay your debt off much faster. Many lenders are more than willing to work with consumers who need a lower interest rate, as getting their money back from the consumer, even if it’s at a lower interest rate, is their top priority.
4. Starting from the top of your debt list, you can now begin making payments on your debt. While you’ll want to pay more than just the minimum on all of your debts, be sure to make a significant payment on the amounts you’ve given the highest priority to. This strategy will benefit you in the long run, as you’ll end up paying less money in interest rates for the large debts.
5. Finally, it’s time to come up with a permanent solution to your debt problem, otherwise you could end up making another repayment plan in a few years. Do you need to permanently curb your credit card spending? Are payday loans putting you in the poor house? If you’re really struggling coming up with a long-term plan for your debt, don’t hesitate to contact a debt consolidation or money management service. These programs can help you’re your finances on track for the long-term.

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