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

So you’ve done preparation work as set out in Phase 1, and it’s time for the meeting you scheduled with yourself as part of that process. The tools you’re going to need for this part of your debt reduction plan are:

Current credit rating

Monthly expenditure List

Monthly income List

List of all debts

Pens and paper

Calculator

Find yourself a quiet place in the house where you’re not going to be disturbed for at least a couple of hours, and set out your “get real with debt” tools!

Step 1: Credit score. The higher your credit score, the better your credit history is likely to be. If you are reading this article, then it’s more than likely your credit score is somewhere down around 500 or lower. What you are aiming for with your debt reduction/elimination is to raise that score up so that you aren’t paying premium interest rates, and have a much better chance of getting a loan for something substantial such as a house or car with good repayment terms.

Now you know what the score is, what you’re aiming for, and why you’re doing it - it’s time to start making it happen.

Step 2: Look at your income list. Is every source of income listed on there? Have you noted any income from stocks and shares for example? Once you’re sure that it’s complete, make a note of the total figure on a piece of paper, and then you can put that list to one side.

Step 3: Look at the expenditure list. Again, is there every possible payment you make each month (or for annual payments a monthly equivalent). In order to know what your true financial situation is, you must have as close to a 100% accurate picture as possible. Add up the monthly expenditure and place the total below the total income figure on your piece of paper.

Step 4: Subtract the expenditure figure from your income total to find out how much money you have unassigned each month.

Step 5: Now look at your debts list. Telephone each company you have a debt with and ask them if they’d be willing to drop the interest. Don’t be talked into taking a larger debt with them in order to pay off your other debts, this often results in people being in a worse financial mess! Make a note of any new interest rates you’re offered on your debt list.

Step 6: Ok, now you know what you’ve got to pay, and what you’ve got to pay it with. You have already factored in the minimum payment on each debt in the monthly expenditure. Now it’s time to decide which of your debts to repay first. It could be that you have some small debts with relatively small outstanding totals. If they are low or moderate interest rates, you could consider keeping these at monthly repayments. If they are higher rates, then you could decide that these are debts that you will eliminate first.

Share out the money you have discretion over each month between your debts. Aim to pay off some smaller debts fast so that you can then commit the monthly payments for these to another debt.

Step 7: Once you’ve decided the order of debt repayment, and the new amounts you are going to commit to paying off these debts over the monthly minimum, create a new monthly payment list.

Step 8: Make change to any bank transfers related to repaying these debts.

Step 9: Make a firm commitment that you are going to stick to this repayment schedule.

Step 10: Put a note in your diary/PDA for 6-12 months time to do a review session of your financial situation. Follow the steps set out in Phase 2 once again so that you can assess if you are still putting your discretionary money to the right debts. Any debts that have been paid off should have their monthly repayment money reassigned to another debt.

That’s it. When you get real with your financial situation and commit to improving it following a logical step sequence you’ll find that even though money is still tight in the short-term, your credit score will slowly increase because of a combination of debt reduction/elimination coupled with regular payments.

You can DO this! Commit to getting real about your finances in 2008 and you will succeed!

Matthew Taylor specializes in helping consumers resolve their credit card debt settlement the best way possible for their unique situation. You can find more useful tips to help you at debt relief.