Debt Alternatives

As more and more people struggle to deal with high credit card and loan balances, they often look for alternatives to pay off debt sooner and fix their personal finances. There are consequences to debt, such as credit rejections, higher interest rates and little disposable income. Explore options to help remedy debt and increase monthly savings.

Debt Consolidation

Debt consolidation, by either taking out a home equity loan or applying for a personal loan with your bank, can help remedy debt faster. Debt consolidation helps because the interest rate assigned to these loans are traditionally lower than the rate on a credit card balance. Plus, when issuing a home equity loan or personal loan to consolidate debt, lenders give the loan a specific term -- perhaps five years or less depending on the amount borrowed. Having a fixed term means paying off the debt by a specific date, as opposed to paying the minimum on a credit card and carrying the balance for decades.

Lower Interest Rates

Debt consolidation isn't an option for some, but there are ways to tackle debt and get rid of balances sooner without a consolidation. Achieve similar results by contacting your credit card company and requesting a lower interest rate on your cards. A good, long-term relationship with your card company helps with negotiations. Good relationships consist of paying your bill on time each month. A history of lateness doesn't justify a rate reduction.

Credit Card Usage

Good intentions to remedy debt can come to a halt if you can't control spending with credit cards. Paying down debt and then charging items again is counterproductive. Learn how to live without credit, and use cash only to buy items that you need. Controlling credit card usage might consist of destroying your cards or keeping them out of close reach, perhaps in a safe.

Budgeting

Establish a monthly budget and decide how much you need to meet your recurring expenses. Give yourself a modest budget to spend on entertainment and miscellaneous purchases. This may involve reducing how much you spend on non-essentials. Reducing spending creates additional disposable income. Use this savings to increase debt payments. Review finances to see if you can afford to double or triple your minimum monthly payments to speed debt elimination.