DIY Debt Payoff #1

Mar 2, 2012 by

If you are detail oriented, self-motivated, and confident talking directly with creditors, setting up and then making work your own debt repayment plan may be a great option to slash or eliminate your unsecured, high-interest debts like credit card debt. Over the course of a few posts, I’m going to suggest specific steps for creating a do-it-yourself debt repayment plan.

A Budget Comes First

Ideally, first put together your family’s budget so you know how much cash you have each month to put toward debt repayment. But if you’ve got a good handle on how much cash you can dedicate to debt payments each month, I’d suggest avoiding letting the lack of a family budget become an excuse to procrastinate. Forge ahead! Every payment you make cuts your future interest expense!

Laying a Foundation

After you’ve settled on a monthly amount you can throw toward debts, follow these steps to lay the groundwork for your DIY debt repayment plan.

  1. Telephone each of your high-interest lenders. Explain you’re experiencing financial challenges and ask for a reduced interest rate and waiver of any annual or “membership” fees. Your tone should be professional and courteous. Anger and frustration—even if justified—won’t help you. Ask to be put on what’s commonly called a “hardship plan.” Don’t lie, but be sure to explain any extraordinary reasons for your financial squeeze like a layoff, health problems, or a military spouse serving overseas.
  2. Make notes of any concessions the creditor is willing to make. Write down the date, customer service representative’s name and employee id number, any new interest rate or monthly payment allowed, and when these terms expire. Ask for a letter documenting your hardship plan terms.
  3. If the first person you talk to refuses to make any concessions, ask to talk to a manager. Again, be courteous and businesslike. Though challenging, do your best to keep your emotions in check.
  4. For creditors who refuse to make any concessions—and many will—look for a good option for a balance transfer.

Persist and Persevere!

Phone every one of your creditors, work the steps above, and take good notes. You might find motivation in approaching the project like a job: You’ve got a series of tasks to accomplish as well as you can and in a businesslike, professional manner. In the end, you’re going to get paid (in the form of far less money coming out of your pocket to pay interest costs) for your work.

Phone a second time if you get the sense there’s any chance you might get a better response if you try again. (Perhaps you happened to be connected with an especially ill-tempered representative on your first call.)

This stuff isn’t easy, but I bet you’ll feel really good when a creditor makes concessions because of the way you’ve handled the call.

Next DIY Debt Payoff post: How much should you pay monthly on each debt?

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