Paying off debt

Make a plan to start paying off your debt.

Some people believe becoming debt-free is an unreachable goal; however, with some planning it is possible to reach that goal. Before embarking, it is important to understand that you will not become debt-free overnight. According to Katie Bryant at America Saves, answer the following questions to help you assess if you need to devise an action plan to become debt-free:

  1. Can you only afford to make minimum payments on your credit cards?
  2. Do you worry about finding the money to make monthly car payments?
  3. Do you borrow money to pay off old debts?
  4. Have you used a home equity loan to refinance credit card debts, and then run up new revolving balances on your cards?

If you answer “yes” to any of the above questions, then you may need to create a get out of debt action plan and implement your plan immediately. Action plans such as the example from SaveandInvest.org may help you devise strategies to become debt-free. Debt calculators can also help you understand how long it may take to pay down debt.

When creating your action plan, it is important to note that you have rights as a consumer when it comes to debt collectors. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, consumers are protected under the Fair Debt Collection Practices Act (FDCPA), “which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.” You can read more about debt collection to make sure you have all of the facts.

Paying off debt has several benefits. Paying off debts reduces stress related to finances. Paying off debts affords you the ability to save more because of lower monthly expenses. Additionally, paying off debt can improve your credit, which may lead to lower interest rates and insurance rates. Visit Michigan State University Extension for more tips, and take the financial health survey from MI Money Health to assess your financial health. Start creating your action plan today to become debt-free and improve your financial health.

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