Job losses and medical bills can result in unmanageable debt, which can quickly become an overwhelming situation. Creating a debt management plan is the first step toward easing the pressure and getting your finances back on track if you’re struggling to pay off several credit card balances, medical bills, school loans, or other debt while keeping up with normal living expenditures.

Here are six debt management options and when to utilize them, depending on your financial condition.

1. Evaluate the situation and make a plan.

When it’s the most cost-effective option: When you’re drowning in debt and can’t afford to pay more than the minimum credit card payment each month. Compounding interest will cause your debt to grow over time if you only pay the minimum payment each month.

What it looks like: The first step is to establish a clear image of how much money you owe. Make a list of all your debts, including the balance, interest rate, and monthly due date for each creditor. This perspective will assist you in prioritizing and determining the optimum payment approach. Some people begin by addressing the debts with the greatest interest rates—the greater the interest rate, the more money you will save by paying off the debt as quickly as possible. Others may find it more practical to pay down the smaller balances initially, so that payments can be directed to accounts with larger balances.

2. Make contact with a credit expert.

When it’s the most cost-effective option: If you’re behind on payments and need help figuring out your options, you may have exhausted all of your other options, such as borrowing from family and friends, and collections agencies are calling.

What it looks like: Because every case is different, speaking with a credit counselor can help you figure out the best way to deal with your debt. The counselor may negotiate with creditors on your behalf to reduce interest rates and costs, as well as assist you in re-establishing funds. If you want to enroll in a formal debt management programme, like step change, who can offer you a single monthly payment to the firm in charge of your plan, which will then distribute payments to your creditors.

Best way to contact Step Change you can contact via Step Change Live Chat or using an official number.

3. Negotiate or postpone

When it’s the most cost-effective option: If you ask before you’re in significant danger, your loan holders may be more receptive to negotiations or forbearance. If you can no longer make minimum payments on unsecured debt but believe you might manage a more aggressive payment schedule, for example.

What it looks like: While each creditor has their own set of rules, you may be able to work out a payment plan or interest rate for your balance. If you have medical debt, for example, seeking a payment plan with your medical provider before the first bill is due is beneficial. Similarly, if you can’t afford your monthly student loan payments, you may be able to postpone them through deferment or forbearance.

4. Debt consolidation is a viable option.

When it’s the most cost-effective option: If you’ve tried negotiating with creditors but haven’t been successful, and you have high-interest credit cards with month-to-month balances. It’s also a smart move to do before your debt-to-income ratio hits 36%.

What it looks like: If you have numerous large balances with high interest rates, debt consolidation, which allows you to combine different obligations into one payment, may be a good choice. You may be able to consolidate credit card debt with the help of a credit counselor or on your own. You could also consider formal debt consolidation with the help of a personal loan. There are numerous companies that provide student loan consolidation services.

5.Look into debt relief.

When it’s the most cost-effective option: If your student loan debt is weighing you down and you’ve already consolidated and/or refinanced it, you may be eligible for debt forgiveness. You may be able to negotiate debt forgiveness as part of a debt settlement agreement for other forms of debt, but this option may come with hidden expenses and financial risk.

What it looks like: Debt forgiveness occurs when a lender agrees to forgive part or all of the debt you owe them, albeit it usually comes with a price tag. Nurses, doctors, lawyers, teachers, and those who work for nonprofits or the federal government may be eligible for various federal student loan forgiveness programmes. You can also look at income-based repayment plans.

Private student loan forgiveness, on the other hand, is more difficult to come by. Debt forgiveness is also not usually an option for other types of debt, such as unsecured credit cards.

6. Make a bankruptcy filing

When it’s the best option: When all other alternatives in credit counseling have been exhausted and you owe more than you can afford to pay. If you’re depleting your retirement funds to pay debts or rent, third-party collections agencies are garnishing your salary, or you’re underwater on your mortgage, it might be your only alternative.

What it appears to be: Filing for bankruptcy or bankruptcy protection as a result of debt should only be used as a last resort. All of your assets will be assessed and may be utilized for repayment, which might have a substantial negative impact on your future ability to obtain credit. Before filing, you may be required to attend credit counseling. It’s important to note that filing for bankruptcy does not automatically discharge student loan debt.