How to Consolidate Debt and Eliminate Credit Card Debt

Credit card debt can seem like a never-ending cycle. You can make minimum monthly payments on time, but the balance never gets smaller. There is hope, however. One way to pay off high-interest credit cards and eliminate debt is to consolidate all your debts into one manageable debt, then focus on paying that off. There are several options for consolidating your debt, but no matter which method works for you, putting a stop to spending beyond your budget is what will keep you debt-free.

Instructions

1

Create a budget to identify areas where you can cut spending. Write down all your monthly expenses, including utilities, loans, credit cards, groceries, gas and entertainment. Subtract your total expenses from your monthly income to find how much money you should have after bills are paid. Look for areas where you can spend less and apply the savings to your monthly credit card payments or outstanding debt.

2

Stop using your credit cards. When debt is consolidated, regardless of the method, it is important to not use the cards anymore.

3

Use the equity in your home to take out a loan. Home equity loans have a lower interest rate than most credit cards. Also, mortgage interest is tax-deductible, unlike interest from credit cards or personal loans.

4

Get a debt consolidation loan from your bank or loan company (see Resources). This allows you to combine all your high-interest loans or credit cards into one manageable payment.

5

Transfer your credit card and debt balances to a low-interest credit card. Get a new credit card with a low introductory rate on balance transfers and move all your outstanding credit balances to this card. If you can't do that, make minimum monthly payments on your lower interest-rate cards and pay as much as possible on the card with the highest interest rate. Do this until that card is paid off, then target the card with the next-highest interest rate. Continue until you have paid off all your cards.

6

Call your credit card company and try to negotiate a lower interest rate or reduction of your balance. Companies may sometimes settle for a lump sum payment of less than the full amount owed. If not, ask them to at least waive any late fees or other charges.