An Easy Guide To Sorting Out Your Debt Problem - By: Don Saunders

One major problem for most people nowadays is that it is all too easy to know that you have problem with debt but to know just how large the problem is. In fact you may be surprised to find that a significant proportion of those people with debt problems do not have any idea how much they owe or how much in total they are paying out in interest charges on their accumulated loans every month. As a result, the first task in dealing with your debt is to work out just how large the problem is.

Make a list of all the debts you currently have, detailing how much of the original debt is still outstanding and how much you are paying every month. You also need to separate out every payment to show how much of the payment is a repayment of the original loan and how much is simply interest.

You might well be shocked by what you see, not just in terms of just how much money you owe, but in terms of how much of your monthly income is simply going to repay interest. For example, if you are earning $4,000 a month and are having to pay $400 every month in interest charges then this means that you are paying out 10 percent of your monthly income without reducing the total amount that you owe. Now this may or may not sound too bad, but take it one stage further. If $400 is the most that you can afford to pay out each month then you can continue paying this for years without your debt going down at all.

With any luck the balance between the sum that you are having to pay in interest charges and the sum going to repay the principle of your loans will be reasonable and it is difficult to quantify exactly what this should be as it will change from one loan to the next. For example, in a normal home loan it is not unreasonable to pay 90% interest and 10% principle in the starting years of a mortgage, however you most certainly do not want to be paying this with your credit card debt.

Having worked out the extent of the problem the next thing you should do is to devise a plan to clear your debt as soon as you can. For this you are going to need to calculate how much in total you can afford to pay each month and then work out how this money should be divided between your different debts.

One solution is what is occasionally referred to as the 'snowball' method and involves paying off your smaller debts. You will then have more money available to apply to your other debts and can progressively work your way up towards your biggest debt.

A second solution to the problem is to tackle the largest debt first and so save the greatest amount of money in what is essentially wasted interest payments. This is not an easy method however and progress is slow which makes it it difficult to keep to this particular plan.

Whichever course you choose to follow you must not simply ignore some of your debts while clearing the others or you will fall foul of your creditors and cause problems with what might already be a damaged credit record. If you find that coming up with at least the minimum required payment on all your debts then you must speak to the lenders in question and see if they can assist. Most lenders will have a debt reduction settlement program and they may well agree to assist you by accepting reduced payments for a short period, or even to waive your payments for a couple of months, if you explain your situation to them.

If you find yourself in a mess and are trying to figure out just how to deal with your debt then do not make things even worse than they already are by taking on more debt. This might seem to be obvious but you would be surprised by how many people try to borrow their way out of debt. This does not work and merely makes an already bad situation much worse.

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TheDebtAssistanceCenter.com provides all types of debt assistance including such things as the statute of limitations on credit card debt

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