Enormous credit card balances and other debts can affect your peace of mind. And, if you are applying for a mortgage or auto loan, having a high debt-to-income ratio can result in your application being rejected or you may be charged a much higher interest rate if you are approved. You can survive debt and pay down your balance, by devising a good debt reduction strategy to help you eliminate your debt.
Pay Off Strategy
Several effective methods are available to help reduce your debt faster. One option is to start with the credit card with the lowest balance since this is likely the easiest debt to eliminate. Or, you can pay down the credit card balance with the highest interest rate first, a step that will help you reduce the amount of money you pay monthly in interest charges.
Negotiate Rate
Interest rates are sometimes negotiable and credit card companies may be prepared to reevaluate your interest rate. If you qualify, you may be able to reduce your current interest rate. Not everyone qualifies for an on-the-spot rate interest rate reduction. Credit card companies will only reduce rates for customers with a history of timely payments.
Minimum Payments
Break the habit of paying only the minimum amount required each month. Review your finances and plan to make higher payments to get rid of your debt sooner. Even a small increase in monthly payments will help reduce your debt burden faster.
New Debt
Adding new debt on top of your existing balances will impede your debt elimination efforts. Pay off debt by resolving to stop using credit cards and do not apply for new loans or lines of credit. Shred credit card offers that arrive in the mail and keep credit cards out of your wallet to curtail excess spending.
Consolidation Option
Consolidation is another method to survive debt. Loan or bill consolidation simplifies your debts and usually results in better terms and cheaper payments. You can consolidate debt by taking out a personal loan or home equity loan, applying for balance transfer and moving all your balances to a single card or by working with a debt consolidation company to combine debts into one monthly bill.
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