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How to Take Control of Your Debt
By Kathy Johnson
California Mortgage Rate Columnist
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If your 2006 New Year's resolutions include getting out of debt, you're not alone. Here are some ways to reduce debt and take control of your financial future.
Survey Your Debt & Make a Plan
First, find out what you really owe. List all your current debts and how much you pay on these accounts each month, including credit cards, car loans, student loans, and so on (don't include your mortgage). Calculate both total debt and total monthly payments.
Determine how long it will take you to pay off your debt, and create a realistic spending plan to help you achieve this goal. If you can't make your payments, call creditors to negotiate a way to keep them happy (and keep them from reporting your accounts as delinquent).
Debt Reduction Options
You may want to consider a debt consolidation loan. Home equity loans or lines of credit may be able to offer lower interest rates. Other options include "cash out refinancing," which means taking out a new (and larger) mortgage on your home, and using the extra money to pay off other debts. Personal loans may also be used to consolidate debt if you don't own a home, or prefer not to use your home as collateral.
Most importantly, commit to controlling your spending. Debt consolidation will only help you if you stop accumulating more debt.
If you need professional help, reputable credit counseling agencies offer services designed to teach you how to manage your money and get out of debt. They can also help you negotiate a workable repayment plan with your creditors. And if you're considering bankruptcy, the law now requires you to receive credit counseling from a government-approved organization within six months before you file.
Financial freedom starts with managing debt. Make 2006 the year you take control.
About the Author
Kathy A. Johnson is a freelance writer and editor based in Florida. She has worked as a writer and editor for several publications, writing articles on health and fitness, gardening, teen issues and other topics. She is currently the features editor of Forum, a bimonthly publication of the national mothers group, Mothers & More.
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