DIY debt consolidation plan

One of the most asked question when it come to debt is "what is the best way to get out of debt?" Well, it definitely have something to do with drafting a bailout plan and stick to it (read: work). Certainly, if there's anyway you can 'cover' high interest rate loans with lower ones, do take the plunge. Even when the amount is not much (considering the bad credit standing you have), you'll save quite a bit from the switch.

Anyway, the proper way of dealing with debts is to come to terms on how much you actually owe. Ask anyone in debt about the amount they owe and you'll find that most people rather not think about it. Sadly, that does not change the fact that the debt will continue to snowball unless you DO something. List out all your debts, like this:

Credit card 1: $3550 (37% interest - paying only minimum payment)
Credit card 2: $1720 (37% interest - paying only minimum payment)
Credit card 3: $800 (18% interest - current)
Personal loan: $23,750 (6.9% interest - two months overdue)
Car loan: $18,300 (6.5% interest - current)

Now you have a clearer picture of how much you owe, even though the very thought of it make you cringe. Next, decide how much you have left over every month after deducting basic expenses. It should look like something like this:

Salary: $3500
Rent: $900
Car: $400
Food $600
Petrol $400

So that's a $1,200 leftover from what you're making after deducting expenses. You'll see that with such limited amount in your hand, there has to be a careful selection as to what gets paid first. Obviously, getting out of credit card debt is of the highest priority especially if you can only managed to pay minimum payment (credit card 1 & 2).

You'll want to renegotiate your personal and car loan deal to stretch over a longer period of time with lower repayment every month to keep up. Assuming, after three months, you have successfully eliminate all the debts in credit card 2, while continue to pay minimum payment on card 1 and barely getting by with the rest of the debt. Here's two things you need to do. Firstly, don't start spending on card 2 again, thinking that it's safe to do so now. Secondly, continue with paying $1,200 towards the next highest interest debt - card 1. Do not reduce the payback amount thinking that you have one less item to pay for. Don't ever get too comfortable, give yourself a reward, or throw a celebration whatsoever - crawling out of debt takes patience and endurance

Even when you are done paying credit card 1 and 3, continue to pay $1,200 each month towards personal loan and your car loan to be debt-free in the fastest time. Since you are are used to living without the money, you'll barely miss it. Of course, after payment of debt, continue to invest to accumulate so that you will never be in debt again.

Do not always take the plan to consolidate debts to pay debts, if you have the courage and determination to do so. The work plan for each, with a huge amount of debt until you have accumulated new debt.