Do It Yourself Debt Relief

Congratulations. You’ve made a decision: it’s time to buckle down and pay off your debt. While the task may seem daunting, it’s absolutely doable. If you exercise that stubborn self-discipline muscle, keep your eye on the prize, and remain positive, you’ll be square before you know it.

Below are a few helpful hints to start you down the liberating road of debt relief.

Make Your Minimum Payments…Plus a Little More

Instead of going out to dinner on Friday nights or buying the latest DVD set of your favorite television show, use that money to start paying more than your minimum monthly payments. Believe it or not, paying the minimum balance is exactly what banks and lenders want you to do because then they make more money. When only the minimum is paid monthly, the term of the loan is extended for as long as possible and the borrower ends up paying the maximum amount of interest; good for banks, bad for debtors. If you commit to frugality, however, and pay as much as possible each month, you’ll watch the balance drop right before your very eyes.

Consolidate by Developing a Snowball Debt Payment Strategy

Figure out which of your credit cards has the lowest interest rate and then determine its maximum limit. Is the card maxed out? If not, consider moving higher-interest bills to your card with the lowest rate. Most credit card companies tolerate (even endorse) this shuffling strategy.

If you have multiple credit cards with a combined debt sum greater than the max limit on your low-interest card, consolidate the debt in phases. First, determine which card has the worst interest rate; then, transfer this debt to your credit card with the most attractive interest rate. Continue making minimum payments on your other credit cards. When you finish paying off the low-interest card saddled with the highest debt, repeat the process with the next highest card. Keep doing this until every debt is fully paid off using your low-rate credit card.

It’s All Right to Use Your Savings

If you have savings stashed away, why not use it to pay down your debt? The money in your savings account is probably earning less than the interest you're paying on credit cards. So, at the end of the day, you are saving money by using your savings to pay off debt.

Time to Tuck Away the Shame and Ask for Help

Does someone you know have the money to get you out of a hole? Sure, asking for money is excruciatingly difficult, especially for the prideful; but what are family and friends for? If you have a tight-knit family or friends that are like family, pack away your pride and just ask. Write up an agreement and decide on an interest rate you can afford. You’ll be surprised at how many people are willing to help you out. Just be sure to pay the loan back or your relationship may suffer the consequences.

Let’s Make a Deal

This suggestion requires a shot of gumption, but it can pay off huge. Pick up the phone, or set a face-to-face meeting, and explain your situation to the creditors. Present them with a solid plan. Educate them about your plan to pay X amount by Y date. Explain that after consulting a debt counselor and crunching the numbers, your solution ensures the maximum amount of payment to the bank. At the end of your pitch, throw in a kicker and bluntly mention that if your offer is not accepted, you'll continue to be short on payments and will have to declare bankruptcy. Provide a plan that proves your ultimate goal and desire is to fully payback the lending institution; confronting and working with creditors is always better than avoiding the issue…and their calls.

Bankruptcy

The final choice, for those in quicksand, is bankruptcy. While declaring may have a terrible effect on your credit rating, it can also provide instant relief and a chance at a fresh start. By all means, exercise every possible solution before heading down bankruptcy row; but as a last resort, if you’re constantly being KO’d by debt, it may be time to pull the rip cord.

We won't sugar-coat: the first few months of implementing a debt-relief strategy are rocky and awkward; getting used to a leaner lifestyle is difficult—especially for those unaccustomed to tightening their purse strings. If you stick to the plan, however, financial freedom is only a few short years away. Good luck and may the self-discipline, debt reduction force be with you!