Some ways to pay off debt are more difficult than others, but to really hit it hard, try some of these suggestions.

1. Budget it out

Unless you write a budget, you’ll just keep overspending and not having money left over to pay off debt. Starting with your income, start writing at least a basic budget that will let you see and control where your money is going. Creating a budget is an essential step in paying off debt, and once you get one, you should create a debt payment plan with some of these other tips.

2. Pay your debts with savings

Many people would think that this is crazy, but because of how compound interest works, it’s a pretty smart idea. Savings rates these days are so low that your debt will compound more interest than your savings. This means that if you keep putting money into your savings account and leave money on a credit card, you’re going to be wasting a whole lot of money.

Since you can’t ever match your savings rate and your debts’ interest rates, you should use your savings to pay off your debt. It’s a smart idea to keep a bit of money in the bank for an emergency. You don’t want to have to charge emergencies to a credit card, so it’s a good idea to have a small emergency fund.

Beyond a small emergency fund, you should really take all your money from savings and put it to your debt. This will help you pay off your debt more quickly than just about anything else if you have a hefty amount in savings.

3. Boost your income

One of the simplest ways to pay off your debt is to boost your income. You can do this by working more hours, taking a second part-time job, or renegotiating your salary. You can also do it by cutting back on your spending. Going out less often and shopping less will help you put more money toward your debt. Also, check for other ways to bring in money, including income support and tax credits.

4. Overpay your debts

Because of how compound interest works, paying more than you owe on your debts each month is one of the most effective ways to pay down debt. Since you’re paying off the principle sooner, you’ll pay less interest over time and you’ll pay off your debt sooner. Any time you can, you should overpay on your debt payments, even if it’s by just a few pounds a month.

5. Use a home equity loan

A home equity loan is basically increasing your mortgage. If you have equity built up in your home, you can use this type of loan to pay off your higher interest debt. You can’t use this option unless you actually have equity built up in your home, though.

If you do have some equity in your home, this can be a really effective way to reduce the number of debts you have. You won’t, of course, actually be reducing your debt as much as you’ll be reducing the amount you pay as a mortgage has a lower interest rate than most other debts.

All loans carry certain risks, but a home equity loan may carry even more risks. With this type of loan, you could lose your home if you defaulted on payments, just like you would if you couldn’t pay your mortgage.

6. Make a debt snowball

One of the best ways to pay off debt is to make a debt snowball. Basically, you’ll focus on one of your debts at a time. This can help you pay off debt more quickly and save on interest payments.

Pick one debt to pay off first, either your smallest debt or the one with the highest interest rate. Pay the minimums on all of your debts but that one, and dump all the extra money you can get into the first debt. When that one is done, you’ll take the extra money and the minimum payment from the first debt, adding it to the payments for the second debt. With every debt that you pay off, you’ll have more money to put toward your other debts.

Using debt reduction programs on your computer can help you see just how this snowball process will work for you.

7. Speak with your creditors

You may be surprised at how much you can achieve by talking to your creditors. For the most part, these companies would rather get your full payments than take you to court or watch your file for bankruptcy. As soon as you have a problem paying off your debts, you should call your creditors.

Different creditors will offer different options to help you out. Some will lower your monthly payment. It will take longer to pay off your debt this way, but the payments will be more manageable. You’ll end up paying more in interest, but you’ll have an easier time working your payments into your budget.

You may also be able to lower the interest rate on your loans, which will reduce both your monthly payment and the total that you’ll pay over time. This is probably better for you, since you won’t end up paying as much money over time.

If you have documentation that you can’t pay your debts, your debtors may freeze your interest for a bit. They can knock down your monthly payments a bit and let you pay just on principle for a while.

8. Use a low rate credit card

Instead of consolidating your debt through a debt management company can be a good option, but transferring credit card debt can help, too. You can basically get one credit card with a low interest rate, and then transfer balances from your higher interest cards onto it. You’ll probably find several different offers for balance transfer systems that will give you a low interest rate for a while.

Find the card with the lowest interest rate for the longest period of time. When you transfer your balances, pay the new card off as quickly as possible. Also, don’t use your old cards or use the new card for any random charges. If you’ll have trouble staying out of more credit card debt, you should close up the old accounts and cut up the old cards.

Before you start doing this, you should read about the good and bad points of credit card consolidation.

9. Talk to a debt management company

If you really feel like you’re drowning in debt, one possible solution is to talk with a debt management company (DMC). This should be one of your last resorts, though.

Basically, a DMC will give you a debt consolidation loan, which is one big loan that pays off all your other loans. Instead of paying several payments for different debts, you’ll make one payment to the DMC each month. Usually your payment will be lower, and you might get a better interest rate than you would with some credit cards.

10. Go bankrupt

This is your absolute last option, and you shouldn’t turn to it unless you have no other way to pay off your debt. When you file for bankruptcy, the courts will claim your assets – which might include your car and home – to pay off your debts. This can be a little scary, and you should seriously weigh up your options before you step in this direction.

Most people believe that foreclosure laws are designed to hurt rather than help them. Not so. The truth is, foreclosure laws have evolved to protect the borrower -not the lender. The foreclosure process gives you, the borrower, specific periods of time in which to:

• bring your loan current by making up the missed payments (known as “reinstatement”), or

• pay off your loan in its entirety (called “redemption”).

If neither of these options is feasible, you will still have time to prevent your property from being sold at a public auction (the foreclosure sale). You will get the most benefi t out of the foreclosure process if you envision it as a “window of opportunity” to resolve your financial problems. During this period, you have time to learn about the foreclosure process and implement a strategy to stop the foreclosure. Another basic misconception about foreclosure is that lenders want to foreclose.

Nothing could be further from the truth! Lenders are in the business of loaning money—not owning real estate. Lenders are also reluctant to incur the costs of a foreclosure. For example, if your lender is forced to foreclose, it will not only lose your back payments, but it will also incur foreclosure expenses, taxes, insurance, wear and tear while you (or your tenant) live in the property, rehabilitation expenses to refurbish the property for sale, and a real estate agent’s commission once the property is sold. As a result, many lenders will go out of their way to work out a resolution– short of actually foreclosing–if given the opportunity to avoid paying these costs.

Communicate With Your Lender

At the heart of stopping your foreclosure is communicating with your lender. Don’t shy away because you’ve missed payments, concerned that you will miss some payments in the future, or that your property has already gone into foreclosure. Whether you communicate by telephone, le_er, email, fax, or in person, you will have a much easier time stopping (or at the very least, delaying) the foreclosure if you talk to your lender rather than adopting a code of silence. The first step is to determine who your lender actually is. (This is no small feat these days with lenders selling their loans to other lenders like hot potatoes.)

If your property has already gone into foreclosure, the fi rst person you will be dealing with either the foreclosing trustee, or the attorney for the lender. The trustee is responsible for handling the foreclosure process if it is nonjudicial If it is a judicial foreclosure, you will most likely be contacted by a process server, sent by the lender’s attorney. But the problem is that you need to communicate with your lender, not the trustee or the attorney.

So you should request from the trustee or the a_orney, the name, telephone number, and address of the foreclosing lender. In the unlikely event that they refuse to disclose the name of your lender, you can look on the Notice of Default, or the summons and complaint, or telephone the customer service department of a local title insurance company. Another situation may occur where you discover the name of your lender, but it turns out to be a servicing agent rather than the party that actually holds the deed of trust or mortgage.

A servicing agent is a company (sometimes it can be a bank, mortgage company, or private corporation) that is hired by the actual lender to “service” the loan, including the collection of payments, issuing of payment coupons and late notices, monitoring the impounding of insurance and tax payments, and handling foreclosures if necessary. Fortunately, most servicing agents will disclose the name of the lender. If they won’t, you may be forced to negotiate with the servicing agent. In either event, follow the guidelines in this book to communicate and negotiate with them.

Do not under any circumstance ignore your lender’s contacts. Your goal should be to respond to every phone call or letter. Diffi cult as it may be to talk about your financial problems, be polite and cooperative. Follow up all telephone calls with a letter to the person you spoke to, confi rming what was said. If you’re not in when a call comes, return it as soon as you can. When you receive a le_ er from your lender (always keep the original), immediately write a letter in response. It is important to establish a paper trail so you can prove to your lender (or a court, if necessary) that you have been cooperative, especially during the initial stages of the foreclosure process. It is also important to send copies of all of your letters to:

• the lender’s CEO

• the branch manager (if applicable)

• the loan offi cer who helped you obtain your loan, and

• any other person you know by name at your lender’s office.