Financial Literacy 2008 - Debt Management
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6-step debt-elimination program

Harrine Freeman learned to make deep cuts during drastic times. Tired of creditor harassment, Freeman slashed her spending to the bone to get out from under $19,000 of credit card debt.

"I didn't go out to eat, I took my lunch to work, I took public transportation, I didn't buy any new clothes or shoes and I got a part-time second job," she says. "All of those things helped me to start paying down my debt."

It took four years to fully repay her debts, but she now has decent credit and only carries mortgage debt. Her experience prompted her to open H.E. Freeman Enterprises, a personal finance services company, in Washington, D.C.

Taking control of debt doesn't necessarily require an all-or-nothing approach and not all of Freeman's advice is so extreme.


"If you spend $300 a month going out to eat, try to reduce that to $150 and use the other $150 to pay down debt," says Freeman, whose experience paying down debt inspired her book, "How to Get Out of Debt: Get an 'A' Credit Rating for Free Using the System I've Used Successfully with Thousands of Clients."

5. Improve your terms 
Creditors may waive fees, reduce interest rates or agree to more flexible repayment terms. All you have to do is ask. Knowing how to ask is important, though.
Buy some breathing room
Options for improving your terms vary depending on the type of debt.
Student loans:
  • Deferment: postpones payment.
  • Forbearance: temporary reduction in payments.
  • Loan forgiveness programs allow you to work in exchange for reduction in student loan debt.
  • Call the loss mitigation department if you are behind on your mortgage. You may be able to get your mortgage modified and add the missed payments on to the end of the loan.
  • Try to sell your home before it goes into foreclosure. In extreme cases, the lender may agree to a short sale.
  • If your debt is due to a lack of health insurance, ask for an itemized bill for your medical charges and look for duplicate charges or services you never received. Make sure all the charges are accurate before asking for a payment plan.
Credit Cards
  • Negotiate interest rates and fees.
  • Request a financial hardship plan that lowers the interest rate and the minimum payment amount for a year.


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