Prioritizing Your Debt

Credit Card DebtYour ruler for figuring out which debt to pay first all comes down to one thing – which debt is costing you and your family the most, be it financially or psychologically. If you have a bunch of little debts hanging around, maybe a couple hundred dollars here and there, it may be worthwhile to put those high on your priority list just to get them off your back. Most important, however, should be the most costly debts in terms of dollars and cents. Target your big bucks at credit card debt and other high-interest loans first, either by paying them off or moving the debt into a consolidation loan or similar low-rate situation. And although you're probably jumping out of your seat to go pay off those debts (okay, maybe not), there are a few things you should do and consider before making the first payment.

Video: Foreclosures and Uncollateralized Debt

Tipping The Scales in Your Favor

First and foremost you should have a chat with your creditors to see if you can have the interest rate reduced – you may even be able to decrease your overall debt too. There are two main approaches to negotiating down rates and debt. You could speak with them about the lower-rate card offers you have been receiving and threaten to switch, or tell them you are trying to get out of debt and would like a hand. The first strategy is the most likely to succeed, since the second asks the creditor to pull out that cold steel heart and try to make it beat again, which isn't likely. Don't give up after just one or two calls though. You may eventually luck out with a more sympathetic customer service representative next time. Once you have done all the talking you can do, next you have to come up with a good repayment strategy and budget.

Foundations of a Good Repayment Strategy

Video: Understanding How to Manage Debt

The best way to go about paying off that debt depends on a lot of factors, but primarily on your current credit and assets. If you have a mortgage, a home equity loan may be your best option since consolidation loans secured by your mortgage line of credit are tax deductible. If you don't have a mortgage, or if your credit is still pretty good, a debt consolidation loan may be the way for you. With poor credit you should focus on items which would improve your score, since you could refinance your debt later to get a better rate – this includes paying down credit cards in good standing to less than 30% of the total credit line, and paying off all credit cards which don't have a good payment history to close the accounts. Once you have consolidated your debts, it has been found that a budget based on the frequency of your paychecks is most effective. In other words, if you get paid weekly, your budget has an allotment for weekly payments to your loans and debts. This way it is easier to stay disciplined and actually get out of debt on schedule.

More Resources:

Apex Financial Service
(631) 728-6600

American Consumer Credit Counseling
(866) 826-7038

ING Financial Service
(781) 768-4800

Lane Bridgers Associates, LLC
(856) 638-1855

Merrill Lynch
(915) 534-3100

Pan American Financial Advisors
(210) 682-2121

Smith Barney
(305) 674-3311

(800) 473-3119

Morgan Stanley
(212) 761-4000

Wells Fargo & Co
(415) 396-4000

(914) 777-3393

Tow Financial Advisors
(818) 906-9301

Wilmington Trust Wealth management
(866) 829-1929

Genesis Financial Management
(866) 496-2651

NBS Financial Services
(805) 497-2497