|
Page 2 of 3
By Nathalie Fiset
You have to have determination to get out of debt. This means you will have to make sacrifices and changes in your lifestyle. Make a list of everything you owe. It's important that you know the extent of your debt – to whom, how much and at what interest rate.
.jpg) Once you've done that, your next step is to choose a method of repayment that corresponds to your financial situation:
1. Pay more than the minimum on your credit card. The required minimum is usually 2-3% of your outstanding balance. If your current financial state does not allow you to pay your total balance, then pay as much as you can. Paying the minimum will only worsen your situation. It will take you longer to write off your debt and will cost you more in interest payments.
2. Examine your expenses. I'm sure you'll find one or two expense items that you can do without. Remove it from your budget. Learn to live with less. It's not really a sacrifice if you can continue your normal living without it so it shouldn't be so hard to give up. Look carefully and you will find the extra money to get out of debt.
3. Transfer to a low interest credit card. This will enable you give just one payment every month and at a lesser interest rate. For example, if you have four credit cards at 18%, 16%, 15% and 12%, find out if you can transfer your balances to the card that offers 12%.
Some credit card companies offer introductory low rates to get you to move to their credit line. After the introductory period, the interest usually shoots up so make sure you can pay your balance before the offer expires. Understand how it works. Read the fine print because there's usually a catch.
Another way is to snowball your debt payments. Pay as much as you can for the card with the highest interest while continuing to pay the minimum on the other cards. Once you're done with that particular card, apply that same amount to the next card on your list including the minimum. Keep doing this until your balance drops to zero. Your fund for repayment will increase as your balance decreases.
4) Borrow against your Life Insurance. If your life insurance has a cash value, you can borrow against it to repay your debt. You will be borrowing your own money but it could well be worth it since the interest rate is far lower and you can take your time repaying it. However, if you die before your loan is repaid, any outstanding balance you might have plus interest is deducted from the value of your insurance policy so ensure that you can pay it back.
5) Borrow against your home equity. If you own a mortgage-free home, you can use this to obtain a home equity loan (HEL) that can cover all your outstanding debts. Another benefit is that HEL interest is a deductible item on your income tax return under most circumstances. Be diligent with your payments to avoid the risk of losing your home.
6) Seek the help of family and friends. Unless you are a black sheep in the family or a social pariah, you can more or less ask them to help you with your debts. This way you can repay it more quickly and keep the interests or surcharges from accumulating.
Be clear about it though. A written agreement will prevent any misunderstanding and keep your relationships on an even keel. Agree on the interest and schedule of repayments.
7) Borrow from your Retirement Plan. If your retirement plan has a loan feature, then borrowing from it is another option. The interest is much lower and your repayment goes directly into your retirement fund.
8) Talk to your creditors. If you are unable to repay your creditors using with the current repayment schedule, renegotiate with your creditors. Negotiate aggressively. Request for a lower interest rate and a new schedule in your favor. Creditors are usually amiable to this arrangement if they know that your next recourse is to declare bankruptcy. Creditors would rather see you pay your debt, even minus the interest and other fees, than to accept a total loss.
9) As a last resort, file for bankruptcy. It is your moral responsibility to do your utmost to meet your financial obligations. Do not apply for bankruptcy unless you have exhausted all means of repaying your debts. Bankruptcy can reflect badly on your credit standing and will stay in your record for ten years. During this time, financial institutions will view you as a poor credit risk even if your finances improve in a few years.
Eliminate Credit Card Debt
Credit card debt is an unfortunate part of our life, evermore so if you are thousands of dollars in debt. People with a high credit card debt will usually find that they have been spending more than they can afford to. There's a lot of advice you can get to help you with this problem. The best ones usually turn out to be the simplest and those that require commitment on your part. The wisest course is to start working on it now.
Follow these basic steps to eliminate your credit card debt and take charge of your financial future:
1) Stop using your credit cards. Spend your cash. Don't stop only when you think you are ready to let go of those credit cards. Start off in the right direction by doing it now. Some would advice cutting up your credit card but not to close your account. Another alternative would be to keep your credit card as far from you as possible. Place it someplace where access is inconvenient such as your bank deposit box. You may be tempted to use it from time to time but it is best not to cave in.
Discipline is key for a good start. If you must have a credit card to use in real emergencies, then keep the one with the lowest interest rate.
2) Prioritize. Make a list if you have more than one credit card. Arrange it so that the credit card with the highest interest is at number one, making it your top priority even if it has the lowest balance.
Pay more than the minimum for this particular card to be able to make a dent on your debt. Credit cards with high interest rates tend to compound quickly so it is better to pay it first. Otherwise, you'll find yourself paying more in accumulated interest than actually lessening your balance. As for your other cards, you can continue paying for the required minimum.
Once, you're done paying for your number one card, you can apply that amount to your second highest interest card plus the minimum until you've paid off that balance. And so on. Do this without fail and you will find that not only have you reduced your credit card debt, you have also eliminated it.
If you find however that your budget is not enough to cover these payments, you may need to cut back on your non-essential expenses. If you do this, you will find that you have more funds at your disposal than you might think.
3) Call your card-issuing banks. Be on the offensive. Try to negotiate for better terms such as lower interest rates to make your payments easier. Of course it's still up to the Card Company to decide if you qualify for such terms. If this is not possible, shop for a card company that will allow you to transfer your balance for a low rate. There's usually a time frame involved so make sure that you can pay the balance before the offer expires.
4) Do not increase your credit card limit. Rather, you should stay well below your credit limit. The purpose of increasing your credit ceiling is to encourage you to spend more and this you have to resist. Sure it looks good on your credit standing. But if it well beyond your means and if you're someone who can't resist impulse buying, then it's definitely not for you.
5) Set up an emergency fund. While you work on eliminating your debt, it is a good idea to start an emergency fund. This way you can avoid borrowing on your credit card for those times when you really need money and there's none at hand.
There are a lot of methods you can use to eliminate your credit card debt. What works for the other guy won't necessarily work for you. But whatever method you choose to follow what matters is that you follow through with what you started and to successfully eliminate your debt.
Credit cards in its entirety are not a bad thing. They have their place in this world. For our part, we just need to understand how it works and to use it wisely and responsibly.
For more information on debt consolidation and loans, please go to: http://www.safepaydayloans.com/cheapest-payday-loans.html
http://www.safepaydayloans.com
http://www.drnathaliefiset.com
Article Source: http://EzineArticles.com/?expert=Nathalie_Fiset
EzineArticles.com
 Quote this article on your site | Views: 4446
|
Reduce Debts 
