To get out of debt requires you to implement your own personal strategies for dealing with the situation. Just by knowing a few simple tips you can put together your own plan tailored specifically for your situation. Reducing your debt load takes time, energy, discipline and a plan of action. After your plan is complete you may have to amend it and make some adjustments to make sure you stay on track to achieve your goal of becoming debt-free.
Interest Rates
If you want to become debt-free, the first thing to do is stop using your credit cards. Next, focus on the interest rates for all of your credit cards. Call each creditor and ask for a lower rate of interest. Some will comply with your request and others won't. To get a lower rate of interest, you can check to see which of your credit cards is offering a low promotion or introductory rate. Transfer all balances or as many as possible onto the credit card with the low rate. When you make payments, more of the money goes toward the principal balance, instead of interest, when you have low rates of interest.
List Debts
Make a list of all of your creditors. Categorize your debts by creditor name, balance, payment and interest rate. List the credit card with the lowest balance first. Concentrate on paying off every credit card on the list starting with the smallest balance. Every time you pay off a balance you increase your disposable income. The payment for the eliminated debt should be applied to the next account balance on your list. Continue with this process until you are debt-free.
Consolidation Loan
You may be able to take out a home equity loan which enables you to consolidate your credit card debt all into one payment.This type of loan uses the equity in your home as security. Credit cards usually have higher rates of interest than home equity loans. It is easier and more convenient to make one payment instead of five or six. You can add additional payments to your loan payment to help pay it off faster.
Calculator
Take a credit card loan calculator and key in all of your credit card information such as balance, creditor name, monthly payment and interest rate. The calculator will let you know the payoff date of each credit card. If you increase your payments, for each credit card, a new pay off date is calculated. Without this tool you don't know when your accounts will pay off.
Additional Principal Payments
Send additional money in with your mortgage payment. This helps to pay off your mortgage balance faster and saves you thousands of dollars in finance charges. When you send additional payments, always include a note with instructions explaining how the payment should be applied. To calculate the exact date of payoff when an additional payment is added, use an amortization table and calculator.
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