One major problem for a lot of people nowadays is that it is very easy to know that you have problem with debt but to know precisely how large that problem is. In fact you could be surprised to find that a significant proportion of those people with debt problems have no idea how much they owe or how much they are paying in interest charges on their accumulated loans every month. So, the first task in sorting out your debt is to calculate precisely how large the problem is.

Sit down and list out all the debts that you currently have, noting down how much of the original debt is still outstanding and how much you are having to pay every month. You also need to separate out each payment to show how much of the payment represents a repayment of the original loan and how much is merely interest.

You may be taken aback by what you see, not only in terms of just how much you owe, but in terms of how much of your income is simply going to meet interest payments. For instance, if you are earning $4,000 a month and are paying $400 every month in interest charges this means that you are paying out 10% of your income without reducing the total amount you owe. Now this might or might not sound too bad, but take it one step further. If $400 is the most you can afford to pay each month then you could go on paying this sum for years without lowering your debt at all.

With luck the balance between the amount you are paying in interest charges and the sum going to repay the principle of your loans will be more realistic and it is difficult to quantify precisely what this should be as it will vary from one loan to another. In a typical home loan for instance it is not unreasonable to pay 90% interest and 10% principle in the early years of a mortgage, however you certainly do not want to be doing this with your credit card debt.

Once you have worked out how large the problem is the next thing you need to do is to devise a plan to pay off your debt as soon as you can. For this you are going to have to work out how much you can afford to pay off each month and then decide how this sum should be applied to your various different debts.

One solution is sometimes referred to as the 'snowball' approach and involves clearing your smallest debt first. You will then have more money to pay off your other debts and can steadily work your way up to your biggest debt.

A second solution is to take on the largest debt first and so save the most money in in essence wasted interest payments. However, this is not an easy method and progress tends to be slow which makes it it difficult to keep to this particular plan.

Whatever course you decide to follow you cannot simply ignore some of your debts while clearing the others or you will run into trouble with your creditors and cause problems with what may already be a damaged credit record. If meeting at least the minimum payment on all your loans then you will need to talk to the lenders in question and see if they are prepared to help. Most lenders will have a debt reduction settlement program and they will often agree to assist you by accepting reduced payments for a short period, or even to waive your payments for one or two months, as long as you clearly explain your situation to them.

If you have got yourself into a mess and are trying to work out just how to get out of debt then do not make things worse by taking on more debt. This may appear to be obvious but you would be surprised how many people in debt try to borrow their way out of debt. This does not work and merely makes a bad situation much worse.