If you worry about how you’re going to pay down large sums of debt, you’re not alone. Millions of Americans are unsure how their debt impacts their overall finances, their credit report, and their future. Don’t let it get to you. The key to overcoming debt is to drill down and put a debt management plan in place.
A big part of putting your worries to rest is taking action. Order a copy of your credit report, so you can analyze your complete debt load. Take a look at your current debts: credit cards, mortgages, student loans, auto loans and any others. While all debts must be repaid, debts secured by an asset, such as your home or car, are considered more favorably than credit card debt, for instance. Keep this in mind when focusing on your repayment plan.
Once you know exactly how much you owe, create a monthly budget that factors in your debt repayments. Start thinking about how you will prioritize your debt repayment. Perhaps you want to first pay off credit cards with the highest interest rate.
Next, find areas you can afford to cut down on, such as unnecessary cable or cell phone packages, and work to optimize the amount you put toward paying down your balances. Making more than the minimum payment on credit card bills is essential. You will have to decide if you want to spread the wealth or focus strictly on getting rid of one debt as quickly as possible. As your debt balances decline, lenders will view your credit report more favorably and your credit score will likely improve.
At some point along the way it may feel like you’re going at a slow pace. Keep in mind that paying down debt takes a long time, but your efforts are important. If you are seeking to track your progress, try credit monitoring. You’ll receive updates to your email or mobile device upon changes to your credit score.