The saying that debt is easy to get into and hard to get out of hits home for younger Americans: At the end of 2018, 18- to 29-year-olds carried over $1 trillion in debt, according to the Federal Reserve. That’s the highest level since 2007.
“Understanding your options and making a plan is imperative,” says Billy Hensley, CEO of the National Endowment for Financial Education. “Anyone doing that is going in the right direction.”
Knowing a few key points can help anyone — new to debt or not — resolve their debt faster and potentially save hundreds or thousands of dollars.
Cut your interest rate
A high-interest credit card or loan is costly. But you may be able to pay less interest, and pay off debt faster, with these tools:
Balance transfer cards
Roll the balance of your existing cards onto a new one offering a promotional 0% interest rate. With your entire payment going to the debt, not interest, you’ll pay it off faster and save money. Two caveats: Pay it off within the promotional period, and you’ll need good or excellent credit to qualify.
You can consolidate multiple debts into a single payment with a personal loan. You might try this if your card balances are too much for a balance transfer card. This also requires good to excellent credit.
Debt management plan
If you’re having trouble paying your minimums, a debt management plan from a nonprofit credit counseling agency can cut your interest rates and put you on a repayment plan.
Weigh the pros and cons. “Debt consolidation or balance transfer makes sense when monthly payback, interest and payment terms are less than your current payments,” Hensley says.
He cautions, though, that transferring debt can tempt you to take on more debt. “The question is, will you be strong enough to not use that original credit card again to make ends meet or to fill a desire?”
Make student loans more affordable
If you’re struggling to handle monthly payments, consider these options:
You have several repayment options if the standard plan isn’t affordable. With the income-driven plan, for example, your payment will generally be around 10% of your discretionary income.
Call your lender about repayment options. You may also be able to refinance student loans at a lower interest rate, though you’ll need good credit to qualify.
Before you miss a payment you can’t afford, look into ways to manage your student loans.
Question medical bills
Medical bills can be costly, complicated and confusing if there isn’t a clear path to resolve them. But you have a few options to pay medical bills.
First, make sure any insurance coverage has been properly applied. You should receive what’s called an “explanation of benefits” letter from your insurer stating how much it covered. Compare that with your bill to check that charges are accurate.
Next, figure out how you’re going to pay what you owe. For bills you can’t cover in one payment, ask the service provider to establish a payment plan.
For large bills, such as from a hospital stay, tap the help of a medical bill advocate. These professionals can spot errors in bills and negotiate the total owed.
Medical bills can be malleable — don’t take them at face value.
Find out your rights on old debt
All debts have a “statute of limitations” after which you can no longer be legally sued for payment. But you still owe the debt — and debt collectors will likely remind you of that.
Debts in collections are often sold and resold. That means a collection agency could demand payment for long-forgotten bills. Act fast if you’re being pursued for an old bill, says Cara O’Neill, legal editor at Nolo, the do-it-yourself legal advice publisher.
“Find out your state’s statute of limitations period, whether your state requires the debt collector to disclose its expiration, and any penalties the creditor could face for failing to do so,” she says. If a debt is past its statute of limitations, paying even one dollar can reset that clock and leave you vulnerable to being sued for payment.
Check out your consumer rights under the Fair Debt Collection Practices Act and your own state’s regulations before engaging with debt collectors.
If the creditor violates your consumer rights or state regulations, contact your state’s consumer protection agency or try tapping free legal aid from your local court.
This article was written by NerdWallet and was originally published by The Associated Press.