Debt elimination efforts can fail without a solid strategy. Consumer debt can decrease your disposable income and reduce your FICO credit score. Several factors contribute to high debts, such as overspending or income issues. But by employing a few effective methods, you can successfully eradicate your personal debts.
Live Below Your Means
An expensive lifestyle can play a role in huge debts because there's less money to pay down debt each month. Spending less and living within your means can increase your extra income and provide money to pay down debts. This can include trading in your expensive car for one with a cheaper payment or re-evaluating your housing options and getting a place that's more affordable. Reduce your monthly expenditures by $500 a month and you could pay off a $3,000 credit card debt in about six months.
Pay More Than the Minimum
Even if you don't take extreme measures, you can pay off debt with higher payments each month. Making small $25 minimum payments on a credit card each month is hardly enough to pay off a huge balance. If anything, you'll pay off the new interest charges for the month and perhaps a tiny percentage of the actual principal balance. Increase your minimum payments each month by at least half. Whenever you have extra money, put these funds toward your debt.
New Charges
You can't pay off a credit card if you constantly add new charges to the account. Change the way you spend money, and instead of reaching for your credit card, use cash to pay for items. Benefits to using cash include avoiding higher balances, and paying for things with cash often requires self-discipline and saving up first. If you must use a credit card to meet an emergency expense, don't leave the new charge on your card for several months. Aim to pay off new charges each month to avoid hindering your debt elimination efforts.
Negotiating With Creditors
Speaking with creditors to negotiate the terms of your agreement can help pay off debt faster. You can negotiate the interest rate on credit cards to pay less in interest charges each month. This helps because your monthly payments will go toward a larger percentage of your principal. And if you're on the verge of filing bankruptcy, discussing debt settlement with your creditors may help eliminate the debt for less than what you owe. Creditors may forgive a percentage of what's owed in order to avoid having the entire debt wiped out in a bankruptcy filing.
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