Careful budgeting and cutting expenses can help you reduce credit debt. You should develop a solid strategy for eliminating your debt and stick to the plan, even if it means personal sacrifices such as fewer vacations, less shopping and dropping expensive hobbies.
Minimum Payments
Make more than the minimum payment. Low monthly payments can be attractive, but they also allow finance charges to mount. Paying as much as you can each month will lead to a faster elimination of your debt.
More Income
Find a second job. Use the extra income exclusively for paying off debt. Also use other windfalls, however small, to pay additional money to creditors. Use your winnings from the golf course or a scratch-off lottery ticket to pay down debt.
Fewer Expenses
Slash expenses in every way possible. Sell the newer car you're making payments on and pick up an older model for cash. Use the money you were spending on car payments to pay off other debts. Use the same strategy wherever possible. For example, switch to a cheaper cable television package or drop cable entirely. Or drop club memberships or find a less expensive Internet service provider.
Counseling
Make an appointment with a Consumer Credit Counseling Service (CCCS) agency for more help identifying expenses you can cut. CCCS is a nonprofit agency offering many free services, including household budget consultation. Find an agency near you by looking in the telephone directory.
Better Terms
Renegotiate loan terms. Call your bank or credit card company and ask for lower interest rates. That will result in smaller finance charges and allow more of your monthly payments to be applied to the principal. If possible, use zero-percent credit card bank transfers to pay off high-interest debt. You'll still owe the debt but you'll pay no interest through a promotional period that could last up to a year. Use that time to pay down as much of the principal as possible.
Bankruptcy and Settlements
File for personal bankruptcy or enter debt settlement. These are obviously last-resort options and will seriously injure your credit scores. However, all or some of your credit debt could be eliminated in just a few months through a bankruptcy filing. See a bankruptcy attorney if you feel that's a viable option for you. You can also settle your unsecured debt by reaching an agreement to pay your creditors less than the full amount owed. Generally, settlement agreements are possible only when your account has fallen four to six months behind. Contact your creditors for a settlement agreement.
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