Rapid Debt Reduction Plan - Which One Is Right For You

It really is possible to get rid of the debts hanging over your head by taking some time to set up a rapid debt reduction plan. There are so many different types of debt reduction plans out there that it becomes difficult for many people to know which one is the right one for them.

Credit Counseling

Credit counseling services can help you to work through your financial obligations and find a way to prioritize your existing income to work towards repaying your debts. They can teach you how to regain control of your finances so you won’t end up in the same mess again in the future.

Debt Consolidation

Rolling all your debts into one easy consolidation loan can help you reduce your monthly payments significantly. It sounds like a great option on the surface, but in reality you’re not reducing your debts at all. You still owe the same amount – and in some cases with fees added, more – money than you owed before, but you’re paying less interest. This option also doesn’t address the spending habits you’ve gotten used to that got you into financial hot water in the first place. If you don’t fix the spending problems, chances are you could end up applying for more credit and increasing your debt.

Debt Settlement

Many sources of advice will try to tell you that the fastest way to get rid of debt is to work with debt settlement or debt negotiation arrangements. What they don’t tell you is that you need to already be several months delinquent in your repayments for this tactic to work. They also don’t mention that a settlement can affect your credit rating more severely than just a few overdue payments. In this case, fast doesn’t necessarily mean the same thing as best.

Rapid Debt Reduction

There is one rapid debt reduction plan that not only reduces your debt, but won’t negatively impact your credit rating either. The plan is quite simple, but you will need some dedication and determination to stick to it.

Step One: Cut Costs
Reduce your costs any way you can. This means finding accounts with lower charges or negotiating with your lender for reduced charges. Cut back on those little things you buy each week. Find ways to reduce your utilities bills and living expenses.

Step Two: Get Rid of Excess Baggage
Spring clean your home and your garage. Make a list of anything that could potentially be sold. This means anything you don’t use or don’t want anymore. It also means asking yourself honestly if you really need that expensive car in the driveway or if a smaller, more economical car would do the same job just as well. Downsize, sell off, clean up and clear out.

Step Three: No More Credit
Rapid debt reduction has no chance of succeeding if you’re still charging everything on credit and increasing your balances. Stop using your credit cards immediately. Don’t charge anything else to plastic. Don’t apply for any new credit.

Step Four: Repay Debt
Any extra money you created by selling off unwanted items, put immediately towards one of your debts. If you managed to reduce your monthly repayments on any of your debts by reducing interest costs or down-sizing to a cheaper option, then the money you saved also needs to be allocated to making extra payments on your debts immediately.

Stick with this simple four-step plan and you’ll find that rapid debt reduction really is possible.