However, you could replace expensive debts with a cheaper personal loan (unsecured loan). Before taking on new debts, you might want to check out your credit history.

4. CREDIT COUNSELING

Some people are not disciplined enough to create a workable budget and stick to it. If you can’t work out a repayment plan with your creditors and you can’t keep track of mounting bills, consider contacting a credit counselling organization or a financial advisor. In UK you can use free debt counselling services such as Consumer Credit Counselling, National Debtline and Citizens Advice Bureau. Similar services are available in US.

5. CONTACTING YOUR CREDITORS

A creditor is a company or person to whom you owe money. Many people struggling financially ignore debts and fear contacting their creditors. This reaction will damage your credit record. Creditors or lenders may take action against you in an effort to get payment. If you're finding it hard to get your bills paid, be one to contact creditors. They will be more willing to work with you. Work out arrangements that satisfy you both. Explain to each lender that you aim to repay each debt in full over time, but that they must accept reduced repayments for now. Decide how much you can pay them each month and set up a debt repayment plan. Conclusion If you’re serious about reducing your debt you should stop spending on your credit cards and stop taking out new loans. To increase your income, consider finding a second job or a lodger. Claim every state benefit that you qualify for and work on cutting down your expenses. Sell stuff that you don’t need on eBay or at Car Boot fairs. Put enough money aside for emergencies, but use bulk of your savings to pay off debt. Debts usually cost you far more in interest than you gain on your savings. Also, if you have a fairly good credit record, you should transfer your debts to cheaper lenders. Finally, shop around for better deals for services and products that you use.

Disclaimer: This article does not constitute financial advice. If you require such advice, you should seek appropriate professional guidance.

With this method of debt relief, debtor will no longer have to answer embarrassing phone calls from his creditors. The debtor will not receive any bills or pay creditors directly. The debt consolidation program will directly take control over creditors. The debtor will just need to pay debt consolidation company a single amount every month according to budget which was agreed upon with debtors. So there is no need for any interaction with creditors.

Most of time these systems are free to debtor because fees are paid by creditors, since they would rather get something in return than lose all money that debtor owes them. Also, programs like this work for those with good or bad credit. It is a great solution for debt reduction to use a debt services company or consolidator that uses this method.