Publications from ODSW Social Insights: Letters by DSW (Vol 1) | Page 83

Helping Those with Debt

owes the new card the money at a cheaper interest rate. There are two main
routes. The first is a 0% deal, where the card is interest free for a set period
(even though the person may have to pay a fee to do it), but after that the
rate shoots up. Alternatively, the person can be better off asking for help to
renegotiate payment on a longer term plan without further charge of interest
rate.

Pay off the highest debt rates first
To begin to tackle the debt, it is useful to list all the debts in order of interest
rates, so that the priority is on clearing the debt with the highest interest rate
first, for the simple reason that it is costing the person most. That means that
the person will pay just the minimum repayments on all other lower interest
rate debts. Once the most expensive debt is repaid, the focus is on the next
highest rate card and this continues until the person is debt free. Adding
th e total debt and planning to pay across the creditors is usually not a good
strategy.

Negotiating payment
The person should contact his creditor and express his wish to pay and request
the creditor to offer to lower the minimum for a certain amount of time and
preferably not charge interest rate. It is also possible that creditors are willing
to offer a settlement amount that is usually around 60-70%.
There are also debt consolidation loans that allow a person to pay off the
debt and make one low monthly payment that is less than what the person
is currently paying. A debt management plan in essence consolidates debts
into a lower, more affordable monthly repayment.
The person can also get help from a credit counsellor who may not try to
reduce the overall debt, but will work with the credit companies to lower the
interest each month and lower the minimum so that the person can work on
the principal balance a little more.

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