Filing bankruptcy or hiring an agency to manage your debts can provide an easy fix. Unfortunately, these methods do not help your credit score. Rather than rely on others or take extreme measures to get rid of debt, consider effective do-it-yourself methods to dissolve your consumer debts.
Negotiate with Creditors
Instead of filing bankruptcy to erase a substantial amount of debt, you can negotiate a debt settlement with your creditors. Settlements can benefit both you and your creditors. For starters, you're able to pay off your debt at a lower amount and avoid bankruptcy, and creditors are able to get something instead of nothing. By filing bankruptcy you're no longer liable for your debt. Thus, creditors take a loss. By negotiating a settlement, creditors can recover a percentage of the money owed.
Decrease Spending and Increase Payments
Poor money management can keep you knee deep in debt. Think of the money you spend on non-essentials such as eating out or shopping. You can possibly reduce and pay off debt balances by re-prioritizing your spending. Rather than spend $200 or more a month eating out or entertaining yourself, use this money to pay down credit card balances. Paying lump sums or higher payments each month will slowly reduce your balances and eliminate debt.
Get Rid of High Interest Rates
Some consumers don't take their interest rates into account when paying down debt. But the higher your rates, the longer it will take to pay down the balance. Interest rates impact payments, and creditors only apply a percentage of payments to your principal balance. Talk to your creditors about reducing your interest rate, or apply for a low-interest credit card and move your balances to the new card. Continue to make larger payments with the lower rate to reduce your debt faster.
Avoid Additional Fees
Balances on a credit card don't just result from excess spending. Lenders charge late fees each time you submit a payment late. Plus, there's a fee for cash advances and exceeding your credit limit. Be responsible with credit to help reduce or eliminate additional fees that can increase your balance. Always pay your bills on time and keep your balances low to avoid going over your limit.
Lock Away Credit Cards
You can't manage your debts if you continually use credit cards to acquire new debt. Credit cards do provide a protection. The problem arises when you do not pay off charges on your credit card, but allow balances to increase month by month. Controlled spending is key to managing debt. If you can't keep yourself from making extra credit card purchases, you can go to extreme lengths and either cut your cards in two or lock them away.
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