Do-it-yourself debt relief

[Jan 21, 2011.]

 

One of the reasons consumers lack an emergency savings fund--at least three months of living expenses--is too much credit card debt. The money that should be shifted into a savings account often gets sent to credit card companies or to pay off other loans, leaving the household strapped for funds and forced to rely on payday loans to handle emergencies.

David Bach, author of "Debt Free for Life", offers some pointers for consumers who find themselves in too much debt.

5 debt relief tips

1. Know what you owe. Bach says that many people have no idea how much they really owe because they have never actually made a list of all their debt. Consumers should make a list of all debts that includes the amount owed, the minimum payment and the interest rate, he says.


2. Try the DOLP method. Bach calls his debt solutions plan Done on Last Payment (DOLP) because it focuses on the date when you can pay off each debt. Take each debt and divide it by the minimum payment to find out how long it will take to pay off that debt in full. Many credit card companies now send this information, as well as the required payment to pay the debt in full within three years, with each bill.


3. Focus on the debt you can pay fastest. Bach says you should prioritize your debt by ranking creditors in order of which ones can be repaid fastest. Pay the minimum on all other debt except for debt in the No. 1 DOLP position, and then pay as much as you can to reducing that debt first. As soon as this debt is paid in full, focus on the second DOLP debt.


4. Recognize that debt relief brings emotional as well as financial satisfaction. Bach recommends focusing on paying off debt with the DOLP method rather than ranking debt by interest rate because of the motivation consumers gain when they pay off a debt completely. This motivation keeps them moving forward until they are debt free.


5. Try the Equifax DebtWise.com system. For consumers who need an extra push to stay on track with debt solutions, Bach endorses the Debt Wise automated system that pulls all your credit card debt and other loan information from your credit card, ranks the debt for you, and calculates and tracks all your payments.

Getting your finances in order to reduce debt will eventually result in less reliance on payday loans and greater stability for the future.

 

About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.