Taking Control Of—and Getting Help With—Your Debt

Many of us grapple with debt in the course of our lives. In some cases, this debt can be managed through budgeting discipline and a commitment to making timely payments.

However, debt can also balloon to unmanageable proportions—whether we’ve gotten carried away with spending or fallen on hard times. That’s especially true since interest can continue to mount even while you’re consistently making minimum monthly payments.

If you’ve reached a point where you no longer feel in control of your debt, it may be time to course-correct—and seek help.

Analyze Your Debt—and Do Your Best to Stop Adding to It

As a first step, it’s wise to contain your debt problem as best you can. If most of your debt comes from installment loans—like student loans, car payments or mortgages—then you have a clear picture of its origins and can generally calculate the timeline for paying it off. If it’s coming from your credit cards, then you can analyze your spending to see what you might be able to control by altering your habits.

To the extent possible, try to avoid charging new expenses, especially on high-interest credit cards. Then prioritize your credit card repayments by focusing on the cards with the highest interest rates, as these are likely costing you much more than the initial amounts you charged. Making minimum monthly payments is a good place to start, but if you can pay a bit extra, you can make more of a dent in your balances.

Explore Your Options

There are multiple ways to approach debt management, including consolidation and bankruptcy. There are pros and cons associated with each option, so it can be helpful to speak with a financial professional, such as a money coach or debt counselor, who can help you take an objective look at your situation and evaluate potential impacts.

Several non-profit agencies have been created to assist people with debt. In the U.S., the Federal government recommends working with credit counseling services that have been accredited by either the National Foundation for Credit Counseling (NFCC)¹ or the Financial Counseling Association of America (FCAA).²

In addition, free or low-cost debt counseling can often be accessed through credit unions, community groups or religious organizations.

Talk to Your Creditors

If you’ve looked into your options and still find yourself unable to make the minimum payments on your loans and credit cards, try contacting your creditors. Often, creditors will allow you to explain your situation—and your plan to get back on track—and may revise your loan terms, temporarily suspend interest, or accept a lump sum that is less than the amount you owe. That’s because many of them would rather receive some payment than risk not receiving anything if you file for bankruptcy.

The Bottom Line

Debt is a significant issue for many people, but it is possible to get it under control—and there is plenty of help available. Know that you are not alone in facing this challenge, or in tackling it.

Footnotes:

¹ NFCC https://www.nfcc.org/

² FCAA  https://fcaa.org/about-fcaa/