10 Tips to Reducing Debt in 2011

NEW YORK ( LowCards.com) -- Paying down debt is one of the most common New Year's resolutions, and the tough economic times of the past few years have just provided further motivation. While being motivated is a good start, though, to be successful you must also have a plan.

Here are 10 tips to help consumers to reduce personal debt in the new year:

If you need to pay down debt but have multiple credit cards with outstanding balances, focus first on paying off the card with the highest interest rate.

1. Know how much you owe. Collect each of your bills with outstanding debts, including from all credit cards, mortgages and student, auto, personal and bank loans. Create a list of all the creditors with monthly payment amount, balance, interest rate and credit limit for each. Verify the payment due dates and the status of the account.

2. Prioritize which bills to pay first. If you can't pay off all of your monthly bills, first pay the bills that are a necessity for health, shelter, basic groceries and basic transportation. Then pay the secured loans such as your car loan. Payments on unsecured loans, such as most credit cards, should come last in these critical situations.

3. Get a free copy of your credit report and review it. It may contain an error that is creating a lower credit score and leading to higher interest rates on your loans. If correcting the error results in a higher credit score, contact your creditors to make sure they know about your improved score.

4. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you have to pay off your bills. If you are in danger of missing a payment, contact your creditors as soon as you realize you have a problem. They may be willing to work out a payment plan, lower your rate or lower your monthly payment. Explain that you are in debt, the steps you are taking to repay it and what you can pay today. If you request a lower interest rate and get turned down, politely ask to speak to a supervisor and ask again. Document all conversations, including with whom you spoke and the date, time and results.

5. Pay more than your minimum payment. Your minimum payment is usually only 2% to 5% of your balance. At this rate, it will take many years to pay off your debt. In fact, your credit card bill now shows exactly how long it will take. You may be surprised by how much you will pay in interest payments by paying just the minimum each month.

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