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Learn... Plan... Take Action... Eliminate Debt!

Steps to Build Debt Elimination Plan
  Step 1 - Assess the situation
  Step 2 - Analyze your spending
  Step 3 - Identify ways to reduce spending
  Step 4 - Develop the plan
  Step 5 - Take action
  Step 6 - Monitor the results
  Step 7 - Get help if needed
Calculators
  Debt payment
  Debt evaluation
  Interest payment
Tools
  Debt worksheet (pdf)
  Debt worksheet sample (pdf)
  Debt worksheet (xls)
Eight key steps to successful debt consolidation

If you're feeling overwhelmed, upset, or angry about your financial situation, you aren't alone. Millions of people face these kinds of challenges each year. But once you take charge of your debts, you're going to experience an incredible sense of accomplishment that will benefit you and your family for the rest of your lives.

You can do it! These eight key steps will help you win your war against debt.

1. Shop, shop, shop
When you shop for clothing or other merchandise, you compare the price tag, and hopefully the quality, as well as the reliability of the manufacturer and merchant. When you shop for a debt consolidation loan, you have to compare the Annual Percentage Rate (APR) -- and the total payback time. Why? Some loans can take as little as three years to pay off, others 10 or more. The longer the term, the more you'll pay -- even if the interest rate is exactly the same. To make an accurate comparison of your total costs, you'll want to know exactly how much you'll pay the lender over the entire loan period. If the lender doesn't give you the total cost of the loan, we'll show you how to figure it out.

2. Know yourself
Be honest about why you got into debt in the first place, and realize that getting out of debt may well require changes in your habits and lifestyle. Don't look at these changes as "punishment." Instead, use this time as a learning opportunity to take control of your financial future.

3. Have a plan
Research by the Consumer Federation of America and NationsBank has shown that people with incomes between $10,000 and $100,000 who say they have a written financial plan report twice as much money in savings and investments as people without a plan. Similarly, you're much more likely to succeed if you have a plan for consolidating and paying off your debts.

4. Save money
It may sound obvious, but don't consolidate using a loan with a higher interest rate. For example, don't use a consolidation loan at 14% to pay off a student loan charging 8%, even if that means you'll only have one monthly payment rather than multiple bills to juggle.

5. Start high, work dow
If you can't qualify for enough credit to consolidate all your bills, consolidate the ones with the highest interest rates first.

6. Ask for better terms!
Don't be afraid to negotiate for a lower interest rate or fees. You may be able to get a discount if you are already a customer of the bank or credit union, if you are willing to bring your other accounts there, and/or if you let your payments be automatically deducted from your account. Remember, not asking is an automatic "No!"

7. Know the rules
If you are unable to pay back a loan, but successfully negotiate a reduced payback (perhaps to avoid bankruptcy), there may be tax consequences. The IRS considers "forgiveness of a loan" a taxable activity and Uncle Sam may want to take his share of the discount as if it were income to you.

8. Be realistic
Understand that debt consolidation is just one tactic in what will be your overall strategy to get out of debt. Consolidation won't make your debts magically disappear, but it can help you get a handle on them if you use it in the right way.