Options are available to help you deal with your debts. Consumer debt is habitual, and many people struggle to pay down their credit card balances. Shopping sprees, cash flow problems and other issues contribute to huge debt. And despite your best efforts, reducing debt can prove challenging. Knowing your options is key to quickly and effectively lowering your balances.
Money-Saving Tactics
Reducing your monthly expenditures and increasing your savings helps get rid of debt faster. You'll spend less money on non-essentials, and you can put the savings toward your credit card bills and other installment loans. Think about how much you spend on entertainment, shopping and other extras each month. Keep all your receipts for 30 days to assess your spending habits. Let's say you spend $400 a month in shopping and entertainment alone. Prioritize your spending and use this money to pay off debt instead. The savings can eradicate a $2,000 credit card bill in six to nine months depending on the interest rate.
How to Use Credit Cards
Some people get into a routine of paying for everything with credit and practically living off credit cards. Using credit cards isn't a bad idea in itself. If you are enrolled in a credit card rewards programs, or if you are trying to improve your credit score, using credit cards occasionally helps increase rewards points and your personal credit rating. The problem occurs when you don't pay off charges in full and carry a balance from month to month. Plan to use cash and keep credit cards out of your wallet, especially when shopping.
Lowering Interest Rates
How fast you eliminate your consumer debts depends largely on the interest rate you're paying. Every monthly payment sent to your creditor pays down the new monthly interest charges and a percentage of the principal balance. A high interest rate means that creditors will apply less of your payment to the actual outstanding balance. In fact, you can make a monthly minimum payment and creditors may apply the entire amount to the interest charges, which means the principal can stay the same from month to month -- unless you make voluntarily higher payments. Call creditors and ask them to lower your interest rate. Qualifying for better rates entail a good payment history with creditors.
Consolidation Loans
Consolidation loans work because you're able to pay off your debt in a fixed term -- perhaps three to five years. Plus, debt consolidation loans often have interest rates significantly lower than most credit cards, which equals lower monthly payments and fewer interest charges. Banks and credit unions offer debt consolidation loans. Qualifying requires collateral such as home equity or a car title, and lenders do require a good credit score (high 600s and higher) and verifiable income.
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