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Managing Debt – How To Get Out Of A Bad Credit Situation

By Janet Lacey
Published: Sunday, September 20th, 2009

Millions of Americans today are finding themselves in bad credit situations. If you are one of them, you definitely have reason to be worried. At the same time, there is no point in being disheartened, because thinking and brooding over your bad debt situation is not going to help. Only affirmative action, a strong willpower, good planning and a practical approach can get you out of a bad debt situation. Some of the main ways by which you can slowly but surely become debt free (remember, there are no shortcuts here) are: 

Change Your Attitude: A large number of people have gotten into a bad credit situation because of job losses, medical situations or family emergencies. But most Americans who are in a tight debt spot right now are there because they have simply not been able to manage their debt properly. If your lifestyle involves maxing out your credit cards, living a life beyond your means and income or a tendency of getting what you like right there right now, then you need to change your attitude big time. Do some serious introspection to find out the reason why money controls you rather than the other way round and work at the root cause of your spending habit. 

Calculate The Magic Figure: You know that you are in a bad debt situation, but you do not know how much you actually owe. Well, change that right now by sitting down and listing down all the money that you owe—your mortgage payments, late bills, credit card and loan payments, personal loans or any other sums that you owe. Total it up and remember this figure every time you need to spend anywhere. Based upon this, discipline yourself and chalk out a strategy to pay it off. 

Start Paying It Off: Set a frugal monthly budget for yourself and start paying off your high interest accounts first. These would generally be credit cards. Pay off a little more than minimum on your highest interest credit card while paying minimum on the others, starting from the payments with the highest interest rates to the lowest. In the current scenario, almost all credit companies are cutting down interest rates and payments in an effort to get at least some of the money they owe back. If you feel you cannot afford your credit card company’s interest rates, call them up and request for a lower interest rate, an interest cut or a reduction in payment amount. Who knows, they just might agree! 

Consider Debt Consolidation: In case you have stacked up a number of high interest payments that are getting out of hand, or if managing multiple debts is tough for you, consider debt consolidation. A debt consolidation company will pay off all your existing debts and let you pay back the money at a lower rate of interest for a longer time period. However, managing with balance transfer cards, payment negotiations and self discipline is a better option that should always be considered first.

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