Are you struggling to pay off your bills? Are you receiving dunning notices from the creditors? Are the credit accounts being turned over to the collection agencies? Are you scared of losing your car? Well, you’re not alone. These days, overwhelming debt is one of the most alarming causes for concern in. Hundreds of thousands of Americans are struggling with debt issues. Most people face financial crisis at least once in their lives – whether it’s due to some illness, unemployment, overspending or anything else.

Nevertheless, financial crisis and debt issues can be overcome. The situation doesn’t have to worsen; all you need to use your intellect, wisdom, dedication and patience, and you can surely win the battle against debt on your own. Here are 4 DIY (do-it-yourself) steps towards debt reduction just for you.

  • Know your debts – First off all, you need to evaluate existing debts. Gather your financial documents; take print outs of free annual credit reports and review the reports closely to see where exactly you stand. Take a pen and a piece of paper to note down your current balances, interest rates and the amount to be paid every month towards debts including personal loans, credit card debts, auto loans and any other debts. Annual fees on credit cards should also be taken into account. We won’t talk about student loans or mortgages as these are long term loans with a low annual percentage rate (APR); so let’s be focused on high interest debts.
  • Consider your budget – After collecting all documents, now it’s time to look at the monthly budget. Take a note of your monthly income after tax reduction and subtract mortgage/rent payment from the amount. Expenses like student loan payment, childcare, utilities, insurance and groceries should also be subtracted. After subtracting all expenses, evaluate the amount you’re left with for making debt payments. If the leftover amount is small, look for ways through which you can cut down your spending. You may consider turning off carpooling or cable subscription as temporary ways of cost reduction. The more debt payments you’ll make each month, the quicker you will become debt free.
  • Create a plan – Now make a plan for debt reduction. Subtract minimum debt payments and monthly expenditure from monthly income after taxes. Use the remaining amount for the debt payment with the highest interest rate and highest balance first. Go with this plan every month until the first debt is paid off and then continue to the second highest rate and highest balance account, and so on. It’s fine if the amount you pay towards the most expensive debt every month differs. This is the quickest way to debt reduction. Just try to be consistent on your repayment. Remember not to add any new debt to your credit cards during this time. If possible, also increase the payment amount towards the most expensive debt every month. Track your progress.
  • Start negotiating – While maintaining your DIY debt reduction plan, talk to your creditors and request them to provide you with some flexible terms on the debts. You can lower the interest rate or negotiate for a favorable settlement on some of the outstanding debts by talking to the customer service department. This way, you can negotiate the terms of debts that are dismissed by your creditor already. You may think about taking out consolidation loans like a low interest personal loan or a home equity loan. You can also consider moving some debts to new accounts with lower rate of interests. Moving your balance to a credit card that offers 0% introductory interest rate for 6 to 12 months would help you save a fortune on interests. Make sure you keep every credit card balance below 35% of the credit limits; otherwise it may damage your credit score.

Put your best effort to meet your repayment goal every month and get debt relief. Maintain a chart of your progress and after you reach a major milestone, don’t forget to celebrate your success.