If you’re currently struggling with overwhelming debt and have been for a long time, it’s time for you to pursue a plan designed to reduce debt. A debt reduction plan may also be known as a debt management or debt settlement plan, and this involves working with a debt relief consultant who will negotiate with your creditors on your behalf to lower your outstanding debt balance. If all goes well, you could end up paying off your debt for a small fraction of what you originally owed. Keep reading to learn more about how you can reduce debt with the help of a debt relief consultant.
Process to Reduce Debt
When you work with a debt relief consultant to reduce debt, you’ll start by analyzing your current financial circumstances to identify how much you might be able to pay each month. This will be determined by looking at your income, necessary expenses, and your total amount of debt. After your expenses are subtracted from your income, the money that is left should be dedicated to your debt payments in accordance with the plan that you and your debt consultant will create.
As soon as a plan is formulated, your debt consultant will request that you immediately stop paying your creditors—if you haven’t done this already. Instead of making those payments, you will be depositing money each month into an FDIC-insured account set up for you by the debt consultant. This account acts as your settlement fund and will be applied to whatever negotiation is made with your creditors.
During this process to reduce debt, your debt consultant will speak with your creditor on your behalf. After a significant amount of money has been deposited into your settlement fund, the consultant will begin to negotiate with your creditors, and you will be notified when an agreement is made.
If you’ve had enough money saved, then you may be able to make a single payment to satisfy the negotiated settlement amount. Otherwise, you will be given new payment terms with monthly payments you can afford. If you do end up making monthly payments, it is incredibly important that you stick to the new agreement. Defaulting in these circumstances will void the agreement and leave you in a worse situation than when you started.
How to Reduce Debt for Good
While following a professional plan will definitely help reduce debt, you’ll need to do a lot more than that to stay debt-free after you’re done. Getting and staying debt-free will take a lot of dedication, but it is completely possible. Keep reading for some tips to reduce debt for good.
Basic Tips to Reduce Debt
- Pay more than your minimum monthly requirements..
- If you can’t afford to increase payments on all your debts at once, prioritize your increases by which debt has the higher interest rate or which debt has the lowest balance.
- Track your expenses and follow a strict budget that eliminates any unnecessary expenses.
- Apply any extra income to paying off your debts instead of splurging.
- Don’t use your cards while you pay them off, but make sure to keep the accounts open.
How to Stay Debt-Free
- Don’t purchase anything you can’t afford.
- Keep and maintain one low-interest credit card for emergency purposes.
- Put money aside into an emergency fund to keep from needing to take out a loan in the future.
- Limit your impulse spending behaviors and try to only purchase things you need.
- Develop a reasonable budget plan that divides your income up into necessary expenses, and then set aside some money for any unnecessary purposes—such as leisure or entertainment purposes.
- If you do have to use a credit card, make sure to pay all your bills on time and pay off more than the minimum requirement to keep from falling behind again.
If you would like to learn more about how you can reduce debt with the help of a professional debt relief consultant, Strategic Debt Relief can offer expert advice regarding your situation. Fill out our short application online and get an immediate response, or call us at 877-297-4477 for a free consultation today.