Steps for Getting Out of Debt

1. Make a list of all your debts and assets, ranking debts by interest due on each and assets by interest earned on each.

Debts	Interest Due
1)
2)
3)
4)
5)

Assets	Interest Earned
1)
2)
3)
4)
5)

2. Use your lowest interest-earning asset to pay off your highest interest debt.

3. Shift debts into lower interest situations:

• Call up your credit card company and ask them to lower your interest rate (if your current rate is 18% ask for 9-11%, if your current rate is 10% ask for 7%). If they refuse to even get close to your request tell them (politely) that if they cannot help you, you will be forced to cancel the card and transfer your debt to a different company - that should help motivate them.

• Shop around for cards that offer low introductory rates and transfer your balances from other cards over to the new one.

• Consider getting a loan from family or friends.

• If you have any loans, make sure you understand the exact terms of those loans. For school loans, keep in mind the following:

° For subsidized loans, if you are within the usual 6-month grace period for the loan, do everything you can to pay off as much as possible (unless you have credit card debt at higher interest - take care of that first) because all such payments go toward principal. After the grace period you will be paying principal and interest.

° For most federally-based loans, after the grace period has expired, the larger the monthly payments you make the less interest you will pay.

° Many loan consolidation programs can result in higher interest rates. But some consolidation programs do offer incentives for automated payments that provide a discount in rates as much as 0.8%. Be sure you understand the implications of loan consolidation before you decide to go this route.

° For more information or to access an online loan payment calculator try the following web site and relevant links: www.finaid.org.

4. Organize a debt payment schedule, using the principle of attacking the highest interest debt first with the maximum amount and paying the minimum on everything else.

5. If you are not able to use a credit card without carrying a balance, get rid of it.

6. Make a real budget:

• Determine your current actual budget by recording all expenses.

• Determine where you can free up more money for debt relief.

• Make your debt reduction payment the first thing that comes out of your paycheck.

7. Ask someone you trust to help you through these steps and keep you accountable.