Paying off credit cards and relieving debt can put you one step closer to debt-free living. Credit card balances increase your debt-to-income ratio, and if you owe an excessive amount, credit cards can lower your personal credit rating. Learn different tips for paying down these balances, and keeping balances within a reasonable range.
Debt Consolidation
Debt consolidation can provide help with relieving credit card debt. Debt consolidation agencies can help you through the debt elimination process. They often contact your creditors to negotiate a better interest rate on your debts and work to get your minimum payments reduced. Through their consolidation method, debt consolidation agencies take your credit accounts and merge them into one bill. This one bill has one monthly payment that you send to your consolidation company; however, there typically is a fee for debt consolidation. Look around first and compare fees. Work with a nonprofit debt consolidation agency to avoid hefty fees.
Tap Into Home Equity
Tapping into your home's equity is another method to relieve credit card debt and improve finances. There are three methods for borrowing cash from your home's equity. You can apply for a home equity loan and receive a lump sum from your lender; apply for a home equity line of credit and withdraw cash from a revolving credit limit as needed; or refinance your mortgage loan and take a cash-out option. The money from either option can pay off credit card balances and other debts. You'll then repay the mortgage lender at a much cheaper interest rate and monthly payment.
Use Disposable Income
Take your disposable income and pay down your balances, and don't use this money for shopping, entertainment or vacations. Using your extra income to relieve credit card debt may inconvenience your life, but any inconvenience is temporary, and well worth paying off your balances. Start by assessing how much you have after paying bills. Cut out lunch trips, extra personal services and any other expense that takes a chunk of your income. Determine how much you have extra after paying your expenses, and aim to put this money toward eliminating your credit card balances.
Lower Interest Rate
Get the best interest rate possible on your credit card debt and lower your balances even faster. There is a strong connection between high interest rates and debt. The higher the interest rate, the less money applied to your principal balance. Look at your statements to learn your rate, and then call your creditors and ask them to reduce your interest rate. This simple, quick request may get you a better interest rate over the telephone. With lower rates, your minimum payment drops, and creditors apply higher monthly payments to your principal balance.
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