The economic downturn is not the main the reason that we are in debt. The economic situation merely highlighted and brought into spotlight how much debt we had. We are in debt because of they way we spend money. We spend at least an average of 10% more then what we actually earn.

Generally, without truly being wise and learning how to effectively manage our finances, we will continually be trapped in the same cycle of overspending and being behind on bills.

Now, you can start clearing of your debt by actually paying the required amount monthly. If this suddenly becomes impossible, then you will need the following tips to help you along:

1. Check your savings before you start calling your creditor

The easiest thing you could do is to first check your savings and see if the money you have is actually enough to pay off your debt in a lump sum. Now how this works is you will need to have some amount ready at your perusal in order to settle your debt. You call up your creditor and tell him you are willing to settlement a fraction of the original debt.

Depending on how much your settlement amount is, the creditor might agree on your first try, but if your offer is too low, they might make you an offer and then you will have to decide if you want to meet them half way or pay the requested amount.

If they realize that you might be filing for bankruptcy, and then will definitely work with you so that they will get back part of their money back. You should not use bankruptcy as a bargaining tool as it might backfire and you might get sued and end up paying more than what you owe.

2. Opt for debt consolidation loans

You could opt for unsecured debt consolidation loans. The easiest thing to do is to walk into a bank, apply a personal loan to cover all your loans. This way you can immediately pay all your creditors and end up paying only one party at the end of the month. It is easier to follow and easier to do.

3. Doing the impossible – Request for payment of the original amount without interest

If you are very deep in debt, try getting the creditors to let you pay back the original amount you have used, without all the ATM (or ABM) withdrawal fees, interests and additional fees. Your creditors might not agree but then again, you have nothing to lose, why not just ask?

4. Request for lowering the interest rates if you’re “clean”

If you are quite regular with your payments then perhaps you could get your creditors to lower the interest rates that they charge you every month. It might be possible especially if you have a good credit history.

5. Seek extension of the term payment

You could also stretch your payment terms. You could try extending it from two year to four, or five years. This will drastically reduced the amount you have to pay every month, making your finances easier to manage although you will be in debt for an extended amount of time.

6. Get the agreement in writing

Always get any agreement you make in writing. This will be your proof and evidence. If your creditors have agreed, then make sure that they put it in writing.

Each individual is different and so is their approach to settling debts. Not all of these tips might work for you so you have to continually be on the search ways that you could live a freer and happier life.