Office of Financial Empowerment
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Reduce Your Debt

Tired of seeing past due bills pile up?  You can get out of debt by changing a few habits.  Here are some ways you can reduce your debt:

  • Stop adding more debt.
    When you see something you want to buy, stop and ask yourself if you want it or need it.  Adding more debt by making unnecessary purchases when you still have debt to repay will make managing your debt more difficult.

  • Ask your lender about repayment plans.
    Lenders want their money back, and many are willing to work out a repayment plan.  Simply call your lender and ask if they can offer you a repayment plan that is realistic for your budget. 

  • Look for the best interest rates when consolidating your debts.
    By obtaining a debt consolidation loan from a bank or credit union, you are able to manage your debts more easily since you make only one payment (to the bank or credit union) rather than several payments (to all of your current lenders).  Often, the bank or credit union may offer you a lower interest rate than the rates on the loans you owe, so shop around for the best rate before consolidating.

  • Pay your bills in full and on time.
    Paying your bills in full and on time will allow you to avoid high interest rates and late fees.  If you're unable to make full payments, aim to pay more than the minimum due to avoid paying more in interest and fees.

  • Pay off your high-interest debts first.
    If you have multiple bills to pay, paying off the debts with the highest interest rates and fees first will reduce the amount of money you owe in the long run. 

  • Check your bills carefully.
    When you receive your bills and statements, make sure they are accurate and your rates remain the same.  If there are errors or your rates increased without any explanation, call your lender to fix accordingly.

  • Don't open too many credit cards.
    Having too many credit cards can make it hard to keep track of how much you owe and when you have to pay your bills. Having lots of credit cards (especially if you do not make payments on time) may have a negative impact on your credit score.

  • Create a spending plan to track where your money goes.
    A spending plan helps you see how much you bring in and how much you spend.  Cut back or even eliminate items that you don't need. 
    • An example of cutting back would be purchasing clothes at a low-cost retailer rather than at a designer store. 
    • An example of eliminating an expense would be canceling cable.

  • Create an emergency fund
    Any time you get extra money you don’t anticipate, such as a tax refund or bonus, put it into an emergency fund. This way, the next time you need extra cash you won’t have to use your credit card.

  • Get help from a credit counselor.
    If you need help in developing a debt repayment plan, consider speaking with a Financial Empowerment Center counselor.  Be careful of companies that claim they can pay off all of your debt quickly with one low fee, because it could be a scam  

See how Maria pays off her debt