Your outstanding debts are causing you a significant amount of stress and you see no end in sight. The truth is, you can get out of debt but you need to take action. Below are tips on addressing your debts and following them will reduce them significantly and allow you to avoid drastic measures such as debt proposals and bankruptcy.

1. Have a plan

Sometimes you have many debts at different interest rates that demand minimum payments per month. Consequently, you may sometimes feel like you are throwing money towards debt without getting anywhere. To reduce your debts, you need to have a plan.

Instead of making payments to credit cards, loans, and personal lines of credit, take some time to take an accurate inventory of everything you have to pay off, each interest rate, and each payment you make per month. Because the highest interest rate will cost you more money over time, pay as much as you can towards this one while keeping every other debt at a minimum payment.

That way, when you pay the one with the highest interest rate off, you can then move on to the one with the second highest and move down the line until everything is paid off. This is called the debt snowball.

2. Consolidate debt

Payment many different outstanding debts will definitely affect your cash flow and you may not pay off any of them for a considerable amount of time. For this reason, many people choose to consolidate their debts.

When you consolidate debts, you are bringing all eligible accounts under one. This means you pay one monthly payment and one interest rate. Both of this are usually noticeably lower than having individual accounts. Therefore, you have the opportunity to pay debts off sooner because if interest rates are lower, more of your payments goes towards the principal amount.

3. Stop using credit cards

A large majority of people have credit cards. While they are handy in emergency situations, many who have them rack up charges in a short period of time. With interest rates ranging from 10 to 29 percent it can then be difficult to take steps to pay the card off.

While it is advisable to have a credit card for emergencies, you need to stop using them regularly if you want to get a handle on your debt. If you do need to use it, make sure you pay off what you use per month. If you have an emergency, consider using a loan or line of credit where interest rates may be lower.

4. Pay more than minimum payments

As mentioned different debts require you to make minimum payments on them per month. While it is good to keep up with these payments, they typically are only enough to cover the interest rate. Therefore, nothing is going towards the principal and you will never pay the debt off completely.

For all of your outstanding debts you need to try your best to make payment above the minimum as this amount will go towards paying off the principal amount. As described earlier, the debt snowball process is effective because while you will be paying minimum payments while you put larger amounts to debts with higher interest rates, this process has proven to allow people to tackle debts one by one until they are debt-free.

5. Cut spending

Cutting your spending is a no-brainer when it comes to trying to reduce debts. However, it is a step that people think they are unable or unwilling to do.

Failing to cut spending will trying to reduce debts just leads to a vicious circle with nothing being accomplished. To pay off your debts you first need to increase your cash flow and a big part of this is reducing your spending. Attempt to make a list of all of your monthly bills and expenditures per month and try to cut anything that is not a necessity. The amount you save can then go towards your outstanding debts.