Reducing Debt
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- How can I decrease my credit card debt?
- What do I do if I can't pay my bills?
- How can I learn more about reducing debt?
Frequently Asked Questions:
1. How can I decrease my credit card debt?
ANS: Consumer debt has grown steadily for the past 40 years. Since
the mid-1960s, total consumer credit outstanding relative to disposable
income has fluctuated in ranges of 16-21 percent. That means anywhere
from 16 to 21 cents (Federal
Reserve) of every dollar goes toward debt.
Many Americans find themselves only a paycheck away from financial difficulty.
A serious illness or job layoff could affect your ability to pay bills.
There are a number of methods you can use to decrease credit card debt.
- The "Most Important" method focuses on repaying debts
most important to your credit rating or to maintain your family's safety.
- The "Low Balance" method focuses on paying off bills
with the lowest balances. Then the money used for those payments can
go to pay off other debts.
- The "High Interest" method is paying off those debts
with the highest interest rate reducing the total spent on interest
charges and increasing the amount available to pay down principal.
- The "New Payment Plan" method is used when credit payments,
not including mortgages, exceeds 15-20% of your take home pay and creditors
will work with you to set up monthly installments that are more in
line with your income.
- The "Debt Consolidation" Method is being used when
a loan is obtained for the purpose of paying off all your debts. Your
monthly payment will be lower because repayment is spread out over
a longer period of time. It's very important not to take out any additional
loans until your consolidation loan has been repaid.
If credit card debt is weighing you down, consider registering for
UNH Cooperative Extension's Taking Charge of Your Finances or Making
Money Work For You, money management courses offered in your County that includes free access to the Power Pay Debt Reduction Calendar.
Consider requesting the learn-at-home series, Getting a Grip on Your
Money or obtain a copy of Your
Credit File and When Your Bills
Pile Up.
2. What do I do if I can't pay my bills?
ANS: Many people struggling financially ignore debts and fear contacting
their creditors. This reaction will damage your credit rating. Creditors
may take action against you in an effort to get payment. It is better
to be proactive. If you're finding it hard to get your bills paid, be
the one to contact creditors and lenders. Work out arrangements that
satisfy you both. Decide how much you can pay back and set up a Debt
Repayment Plan. For sample letters to assist you while contacting your
creditors, obtain a copy of “ Getting In Touch With Your Creditors”. For a worksheet on
what to do when struggling to pay bills get "When
Your Bills Pile Up". from UNH Cooperative Extension. Also, consider enrolling in
the personal money management course "Taking Charge of Your Finances" or
Making Money Work For You offered in your county.
3. How can I learn more about reducing debt?
Publications:
- Developing A Spending/Savings Plan
- Getting In Touch With Your Creditors
- NH Saves – Build Wealth Not Debt
- What To Do When You Can't Pay Your Bills
- When Your Bills Pile Up
- When Your Income Drops
- Your Credit File
- CardWeb.com, Inc
- Financial Security In Later Life
- National Foundation for Credit Counseling
- NH Legal Advice and Referral Center
- PowerPay
