- 1). Collect all debt information. Include all past and present debt. The student loan information to collect is the name of the loan company, the company's address and telephone number, account number, principle balance due, interest due, interest rate and interest type. The interest type will be either variable or fixed. The credit card information needed is the creditor's name, creditor's address and telephone number, account number, balance due, payment due date, interest rate, late payment fee, and account standing (current or delinquent). Collect information for monthly debt, such as rent, utility bills, car payment information, insurance information, cell phone bill and any other recurring debt. With this information, create a portfolio on each creditor. This makes easy access for future use.
- 2). Divide debt into categories. Debt can be divided into three categories; debt that can be consolidated, unnecessary debt and necessary debt. Extended lines of credits are debts that can be consolidated. This type of debt includes, but isn't limited to, credit card and student loan debt. By consolidating, the interest rate is lowered and late payment fees are either reduced or eliminated. The consolidation company is paid once a month and distributes all collected monies among the creditors.
Unnecessary debt includes money spent on luxury items such as cable television, magazine subscriptions and movie rentals. Necessary debt includes debt as a result of monthly living expenses. Necessary debts are rent, utility bills, car payment and insurance. - 3). Create a monthly financial plan. Creating a monthly financial plan allow goals to be set and met. Balancing the income-to-debt ratio (meaning, basically, that your income more than covers your monthly debt and living expense) obligations allows for realistic goals to be set for paying off debts. The extra money saved from eliminating unnecessary debt can be used to send in extra payments on remaining debt. As the outstanding debts are paid off, close the accounts. Use the monthly financial plan and balanced income-to-debt ratio to set practical time goals for resolving outstanding debt.
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