Many of us have to live with debt as part of our daily lives, whether it is mortgages, bank loans or credit card debts. If left unchecked, debts can create huge problems for the debtor, including damaged credit rating, high interest rates and an inability to secure future loans. Eliminating a debt often takes time and discipline. A few secret tips can make the process easier.
Reduce the Principal
After taking on debt, some people focus solely on their minimum monthly payments, which often constitute the interest only. That keeps the debt afloat but doesn't do anything to reduce the principal: the amount you actually owe. Make sure when you make your payments that you include at least a small amount to address the principal: reducing your overall debt instead of just treading water.
Don't Go Any Deeper
You need to ensure that your debt shrinks rather than grows every month. A strong budget can help you do that. Track every bit of spending you do in a given month -- everything from your mortgage to your morning cup of coffee -- and write down all of the figures on a spreadsheet. Then write down a second row of figures covering all of the earnings your household brings in. Do this over three or four months to get a good average, then see if you spend more than you earn each month. If you do, look for ways to either reduce your expenditures or earn more money until you have completely closed the gap. It will keep your debt from getting out of hand.
Look for Help
If you find yourself in serious debt, you don't have to face it alone. Third party agencies such as National Foundation for Credit Counseling and the Independent Consumer Credit Counseling Agencies offer advice and assistance for those in need. You may be able to negotiate with your creditors directly in order to reduce the interest payments, or take out a debt consolidation loan to reduce your payments to a single amount. Not only can such tactics help keep the amount you owe in hand, but they give you the feeling that you have someone in your corner, and that you're not facing the debt alone.
Stay the Course
Don't expect your debt to vanish overnight. In many cases, you need to reduce it in increments that take place over many months. Don't get discouraged and don't let your discipline slip. Set goals for reducing your debt and use the thought of a debt-free life to help motivate you to stay on task. Over time, it will become second nature to you, and allow you to reach your goals without undue stress.
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