Huge debts can take complete control of your life. Lack of extra money can limit vacation spending and projects around the home. But rather than live enslaved to debt, explore ways to get out of debt quickly and regain control of your life. Debt elimination is possible as long as you develop a plan.
Face Debt
Come to terms with your debt and add up your balances to know how much you owe. Some people avoid facing their debt, but this is key to quickly resolving your balances and getting your life back. Wait until all your statements arrive for the month and then take a calculator to add up the total of all balances. Also take note of the interest rate that you pay on each account.
Be Proactive
You don't have to pay a high interest rate on credit cards. Credit card companies charge interest and this is how they make money off the account. But higher rates make it extremely difficult to pay off balances because a large percentage of payments go towards paying the interest charges. Stop paying a high rate by calling up your creditors and politely asking for a rate reduction. According to Bankrate, a good payment record with the company and simply asking can result in a cheaper rate.
Money Habits
Evaluating how you spend your money is also key to getting out of debt and getting your life back. Spending excessively and going over budget can trigger debt. You may use credit cards to pay for things you can't afford or to pay bills because you spent your cash on needless items. Consider a significant cutback in spending to avoid financial hardship and reverse debt. For an entire month, track your spending and keep every receipt. Compare this number to how much your bring home each month to assess your spending habits. Going over-budget calls for a serious reduction of expenditures. Eat out less, entertain at home and stay away from retail stores to control impulse shopping.
Minimum Payments
Understand that minimum payments are not the absolute maximum you can spend on debt payments a month. Creditors will accept no less than this amount, but you can and should increase your monthly payments to help eliminate debt faster. Based on your personal budget, slowly increase minimum payments until you're able to drop small lump sums on the debt each month. You can start with doubling payments for a couple months, and once you're comfortable paying this amount, start tripling payments. This method works because creditors apply the extra amount to the outstanding principal.
Credit Use
Aim to stop using credit cards and only pay cash for items to avoid hindering your efforts. It's meaningless to make a $200 payment on a credit card, and then charge an additional $200 a few days later. The sooner you can stop using credit and start living on cash, the sooner you can eradicate your debt and get your life back.
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