Debt can be overwhelming. Especially when the credit card bills grow every month, and the collection agencies start calling. Ignoring the situation doesn’t make it go away, especially with debt. However, by following these simple steps, you can begin working your way out of financial despondency in just 60 seconds.
Common Sense Approaches For Getting Out Of Debt
Common sense can make all the difference in changing the bad spending habits that led people into debt. Patience is required because paying down debt does not happen quickly. These strategies are not new and are not quick fixes; rather they are time-tested and effective.
Change Bad Spending Habits
The first step to eliminating debt is to commit to changing your negative spending habits by agreeing not spend more than you make. In other words, if you can’t pay for something in cash today, you can’t afford to put it on your credit card. This rule is the first because without it, debt will always grow.
Distinguish between bad debt and your good debt and bad credit/good credit. OK debt is any debt that has an interest rate under 10 percent and usually includes a mortgage and student loans. Good debt can include your auto loan, if the interest rate is reasonable and the car is affordable. Bad debt is debt that has far higher interest rates and includes your credit card debt and high interest auto loans. Credit card debt is usually the worst debt of all.
Bad Debts First
Take your bad debts and add up the total minimum monthly required payments from all of them. Pledge to pay not only this minimum each month, but a significantly higher extra amount. Only by paying more than the monthly required minimum will you successfully pay down your outstanding debt.
When looking at your bad debts, pick the one that has the highest interest rate. Make every effort to pay that debt down as quickly as possible, even if you have other credit cards on which you owe a larger amount of money. Your goal is to pay down your high-interest-rate debt as quickly as you can.
It’s Up To You To Reduce Debt
Call your credit card issuers and ask for lower interest rates. You might be surprised at how often credit card companies are willing to lower rates on their cards. They do this because they want to keep you as a customer and they understand that they will not make any money off you if you transfer your debt from their card to one with a lower interest rate.
Cautiously Aggressive Repayment Plan
Be careful when paying down your debt. It’s good to be aggressive when paying off credit card debt, as long as caution is used. It can be tempting to spend so much money on cutting down your revolving debt that secured (good) debt, such as your mortgage or car loan are missed or underpaid.
Talking about debt and financial struggles can help reduce personal stress and can lead to discovering new ways to accomplish your goals. There are many online forums with people in similar situations. You can receive plenty of encouragement and some surprisingly good advice from these online forums. Always remember to NEVER give out personal or financial information on these forums.
You are far from alone when it comes to struggling with credit card debt. According to surveys, there are a total of 181 million credit card holders in the United States in 2010. That’s up from 172 million in 2005 and 159 million in 2000. These cardholders held more than 1.4 billion credit cards in 2010. That number is actually down from the 1.48 billion credit cards that U.S. consumers held in 2005.
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