Debt Management| Bad Credit Loans, Personal Loans, Getting a Loan

If you have more debts that you can handle, bankruptcy is NOT your only alternative. It is possible to repay your debts on your own, if you follow these five simple tips:

Make a budget

It is impossible to make a plan to repay your debts on your own if you don’t have a plan. When it comes to money, a plan is called a budget. As boring as making a budget may sound, without one, you have no hope of digging yourself out of your debt mess. Start by making a list of everything you spend money on each month, including rent, car payments, food, and all other expenses. When you subtract this number from what you earn each month you will see how much you have to repay your debts each month. Review your expenses and cut back wherever possible to leave even more money available to pay off debt.

Pay more than the minimum The credit card companies only want you to pay the minimum each month; that’s how they maximize what you pay in interest. Don’t fall for that trap. Pay more than the minimum each month, so that more of your payment is going to paying off the principal, so that you can get out of debt faster.

Pay off your highest interest rate debts first Many people try to pay their smaller debts first, so if they owe $300 on their bank credit card and $2,000 on their department store credit card, they pay off the $300 credit card first, because it’s easier to pay the smaller amount, and gives them a sense of accomplishment. That’s great, but if your bank credit card has an 18% interest rate and your department store card has a 29% interest rate you effectively borrowed at 29% to save 18%. That makes no sense, so pay off your highest interest rate loans and credit card balances first.

Use low interest cards to pay off high interest cards A twist on the “pay off your higher interest debts first” strategy is to use a cash advance or balance transfer from a low interest rate card to repay a a high interest rate credit card. If you have an 8% interest line of credit at the bank, or a low interest credit card, take a cash advance at 8% and use it to repay your 29% interest rate department store credit card. That way, more of your payments are going towards principal, and less to interest.

Borrow from family and friends Instead of paying a high interest rate at the bank or finance company, consider asking friends and family for a loan. If your parents have good credit, they may be able to borrow at a better interest rate than you are paying on your debts. Use their good credit to repay your higher interest debts, and then you make the payments on your parents’ new loan.

Borrow against the value of your home If you own a home that is worth more than is owing on the mortgage, get a second mortgage or home equity line of credit. By borrowing against the value of your home, you get the best possible interest rate, and then you use that money to repay your higher interest rate debts.

Make a deal with your creditors If you can’t make your payments and your only alternative may be to go bankrupt, call your creditors and ask them to lower your interest rate, or to give you better payment terms. This strategy may not work, because now that they know you are in trouble they may try to raise your rates, but if your only alternative is bankruptcy, it’s worth a shot.

Just Do It You can pay off debt on your own and avoid bankruptcy, but it takes discipline and planning. Debts will not go away on their own, so get started with your plan to pay off your debts today.

Thomas Gibson writes about debt, bankruptcy and bankruptcy alternatives. Visit http://www.bankruptcy-alternatives-information.com for information about how you can pay off debt on your own and avoid bankruptcy.