If you’ve incurred one or more debts, and the interest burden is continually growing, you might be getting into a vicious debt trap.
To avoid this situation which could decimate your savings or even lead to a bankruptcy, it’s critical to have a clear idea of how much debt you owe and to whom.
The three most common types of debts are credit card debt, medical bills, and student loans. Although the nature of these debts may not be the same, they will all add up quickly to disrupt your financial position unless you take control and start paying them off systematically.
You may want to consider working with a credit counselor who can help determine which debts are best for consolidation.
You may also learn about options are available to make repayments easier and faster over a period of time.
Here is a four-step plan for getting out of debt for good.
Check credit reports regularly
Keep a tab on your credit reports periodically to determine how much debt you owe. When checking your reports, be mindful of any errors that could lower your scores, such as late payments or accounts you don’t recognize.
Check the balances on your accounts and make sure they are accurate. Also, look at the account status column to see if any accounts have been closed.
Ensure all debts show up on your credit report
Ensuring that all of your debts are correctly reported on your credit report is essential to know how much debt you owe.
Debts that aren’t shown on credit reports may still be legitimate and collectible, but they don’t get picked up by credit reporting agencies or credit monitoring services.
You can monitor your credit report for any missing debts and any errors that are reported.
Check old emails to find any old debts
When you are thinking about paying off your debt, you need to ensure you have a complete picture of your debts. You need to know what you owe and to whom.
This is why it is essential to check old emails and documents to determine whether or not you have any old debts that may have been lost or forgotten over time.
If an old debt has been forgotten, it could be become a serious barrier when you are trying to consolidate your finances.
To avoid this problem, the best thing you can do is check all documents to identify old debts and include them in your debt repayment plans. You can also check with your family if any unpaid debts may be owed.
Contact creditors to find out what you owe them
Prepare an updated list of all your creditors. You can obtain this list by looking through your bank statements, credit card statements, and other records that show where you spend money.
For each creditor in the list, start checking one by one if you owe any money to them.
If you do not owe them anything, then remove them from the list. You may also remove any unclaimed debts that are more than seven years old as they are no longer enforceable in court.
For each creditor that you still owe on the list, call them and ask for how much you owe. Verify each creditor’s amount with your own records, and note down this balance next to their name on the list.
This will give you a clear picture of your cumulative debt position, and you can start working on a well-crafted debt consolidation and repayment plan to restore a healthy financial position.