Tips and Debt Advice

Whether you're dealing simply with the aftermath of holiday spending, or years of poor debt management, you can get rid of your debt and increase your savings. Debt can affect your interest rate on loans, and even hinder your ability to qualify for financing. Fortunately, there are several methods of tackling debt.

Debt and Credit Scores

Major debt can reduce your credit rating. Spending a very large percentage of your income on debt can even result in credit rejections. Lenders check your balances on loans and credit cards, and they assess how much you spend on debt payments each month. By paying off your debt, you not only reduce your monthly expenses, you'll boost your credit rating and get better interest rates on loans.

Cash Purchases

It's challenging to track spending when you use credit cards for everything. However, using cash to buy items forces you to budget your money and keep track of how much you actually spend. Trading in credit cards for cash helps you gain control of your debt, because you'll put fewer charges on your credit card. And as you make monthly payments, the balance on your credit cards will slowly go down. To help eliminate credit card use, keep cards at home, or destroy them, to avoid the urge to spend with credit.

Increasing Payments

Minimum payments will eventually pay off your credit card, providing you don't add any new charges. However, it can take years to eliminate debt with minimum payments only. Adjust your mindset; make larger payments each month. This might involve cutting back in other areas of your life, to create additional cash. The money you spend on hair appointments, dining out and entertainment can help reduce your card balances faster.

Lower Interest Rates

Think about transferring your high-interest credit card balances to another card with a lower rate. There are advantages to reducing the interest rate on credit cards. A lower rate brings fewer interest charges, and with lower interest charges, lenders ascribe more of your payments to the outstanding balance. If you don't want to move your balances, speak with your current card companies and negotiate a lower rate. Read the fine print on credit card applications before transferring the balance. Balance transfer fees will apply.