Tips to Eliminate Debt

We can eliminate debt in the following ways:

Limit Spending:

The simple solution may be the most difficult to act upon-limit spending and start saving. Here’s a tip: while shopping, categorize everything as a “want” or a “need.” If the item falls into the want category, put off buying it. If the item is truly a need, determine whether there is a less expensive alternative is there. Make it a game. Figure out how much you save on each purchase, then brag about how wise you’ve become.

Home Equity Loan:

If you own your home, consider getting a home equity loan to pay off your bad debt. Caution: Using this loan to pay off bad debt shouldn’t open the door for you to rack up more debt.

Consolidate Credit Cards:

How many credit cards are in your wallet? What rate does each charge, and what are the fees? If you don’t know the answer to these questions, find out. Then consolidate balances onto the card that offers the most benefits to you. For example, if you carry a balance from month to month, the card’s interest rate will be an important feature. Pick a card that carries a lower, fixed rate. If you don’t carry a balance, pick a card that offers rewards, like a 25-day grace period or online account management.

Use cash more often:

Studies show people spend more, or overspend, when they whip out plastic versus paying for items with cold hard cash.

Get a financial planner:

Hiring financial help isn’t just for the rich, and it doesn’t have to be that expensive. Go to the Financial Planning Association (FPA) for a certified financial planner in your neighborhood.

Put everything in writing:

Create a written list or a spreadsheet itemizing each creditor you owe. For some people, this step will be a big eye-opener. You may find out that you have way more debt than you thought. For others, putting all your obligations in black and white will be a relief … you’ll discover things aren’t as bad as you’d imagined. Either way, having everything in writing gives you a realistic look at where you stand.

Call up creditors and negotiate:

Many consumers don’t realize that they can call up their creditors and ask for lower interest rates, or request that late charges or annual fees be waived. Often, credit card companies will lower your rate on the spot, simply because they don’t want to lose your business. It’s a competitive market — credit card companies send out nearly five billion offers to consumers each year — and most credit card issuers know that customers will switch cards if their interest rate is too high. So using your list of bills you created in the previous step, call up each creditor and start negotiating.

Cut spending and apply savings to debt:

Look for ways to slash your spending. For example, if you own a car, you can refinance your auto loan and save big bucks.

Pay at least three times the minimum due:

Credit card companies typically ask that you pay just 2 percent of the outstanding balance. But if you only make minimum payments, you’ll never get out of debt. For example, if you carry a balance of $13,000 on your credit cards and pay 15 percent annual interest, making just the minimum payments will take you more than 25 years to pay off that debt — and that’s assuming you never charge another dime! The solution: Always pay more than the minimum due. If you can swing it, pay at least three times the minimum required payment. Remember: “minimum” payments now really mean “maximum” payments in the long run!

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.