Credit card debt is one of the easiest types of debt to accrue and can be one of the most difficult types of debt to pay off. Credit cards often have very high interest rates and low minimum payments, which can cause balances to increase over time even if you make payments faithfully. Getting rid of credit card debt quickly will help avoid making costly interest payments.
Tap Into Savings
Perhaps the easiest way to get out of credit debt quickly is to tap into a savings account. A savings account is a safe place to store money and earn a modest amount of interest from a bank, but savings may be better spent paying off high-interest debt. For instance, if you carry a $3,000 credit card balance with a 10 percent interest rate and you have $3,000 in a savings account that pays 2 percent interest, it makes financial sense to pay off the credit card rather than keeping the money in the savings account, since the debt is making you lose money faster than the savings account is earning money.
Budgeting
Another method for paying off credit cards quickly is increasing disposable income through aggressive budgeting. Cutting all unnecessary spending for a month or two, such as going out to eat, shopping for clothes and purchasing expensive drinks or cigarettes on a daily basis, can result in hundreds of dollars of savings each month. Use the extra savings to pay off your credit card.
Tap Into Home Equity
Home equity loans are loans where you trade some of the equity you have built up in a home for cash. Home equity loans are sometimes called second mortgages, since they require you to use your home as collateral for the loan like a mortgage. The interest rates on home equity loans are typically much lower than the rates on credit cards; using a home equity loan to pay off credit cards can transform high-interest credit card debt into a more manageable debt.
Contact Creditors
In some cases, you may be able to reduce credit card debt by negotiating with creditors. If burdensome debt is making it difficult for you to pay a credit card, lenders may be willing to modify the terms of the debt, such as the interest rate or the amount you owe, to help you make payments and avoid bankruptcy. Bankruptcy can be a means to eliminate credit card debt, but it is typically considered an option of last resort since it tends to severely damage credit scores.
0 comments:
Post a Comment