The average family has over $9,000 in credit card debt. They also pay a large amount of money towards their interest costs every month in order to service their debt. Add in outstanding medical bills, home loans and/or their monthly rent expense and it is no wonder why many families are truly struggling. Find three of the best tips below from a leading publication to becoming debt free.
If people paid off their debts, the savings on their interest payments would amount to hundreds of dollars per year, and thousands of dollars over a few years. Remember, it is not just credit card debt that causes people to struggle. Department store revolving credit cards, cars loans, student loans and other non-secured debt such as personal or payday loans add to the amount of bills that people need to pay every month. And many individuals are just one minor illness, temporary job loss, reduction in work hours, or a variety of small steps away from declaring bankruptcy.
People are paying thousands of dollars per year in interest on their credit cards and medical bills. The interest rate on credit card debt is incredibly high, and depending on the card and the borrowers credit score, those rates can be as high as 20% or higher if you have a poor credit rating. Take a few minutes to find out what interest rate you are now paying on your credit cards or bills and more than likely you will be shocked.
While easier said than done, paying off your credit card debts (and medical expenses once the cards are paid off) needs to be your highest priority. And the easiest way to do this is to live beneath your means. To help become debt free, a leading publication offers these tips mentioned below. Using them properly can go a long way to help people become debt free.
If your credit scores and rating are in “decent shape”, explore transferring your high-interest rate balances to a lower rate credit card account. Find the best credit cards to try this with. Most credit card companies and banks offer a very low interest “introductory” rate for three or six months, and some offer zero interest rate deals as a come-on to get your business with them.
The next step to take is right before or soon after the low interest rate grace period on the new card expires. Beware that the interest rate you pay will increase to the normal amount for your situation, and the rate could therefore double or triple. Now before this occurs the next step and really the key to making this strategy work is that you must be willing to, and also able to, move your outstanding balances to another new low introductory rate card when the special rate expires on the first credit card. So what you basically need to do is to keep transferring your balance from one credit card to another. If you don’t move your unpaid balance to a lower interest rate, then you’ll save no money on the amount of interest you need to pay every month, and you will in fact lose money from the higher rates.
The last step, and a key part of the tip to follow in order to pay off your debts, is discipline. In other words you must take the money saved by the temporary lower interest rates and low payment associated with them and pay down the principal on all of your credit cards. Just keep repeating this process of transferring your balance and paying it down until your credit card debt is paid off in full.
Many credit card issuers, including GE Money and Wells Fargo among others, are providing families relief from debt management plans (DMP). A debt management plan can reduce your interest rate, extend your payment terms, or even lower your principal. Read more on assistance from debt management plans.
To accelerate the time it takes you to eliminate your credit card debts, pay a little more money every month. For example, if you were to make just the minimum monthly payment on your bills it takes much longer. Say you have $10,000 in debt and are paying a 21% interest rate, it would take about 16 years and 10 months to pay that credit card debt off at $180 per month. If you increase your monthly payment amount by just $40 per month, to only $220, you could have that same debt paid off in 7 years and 8 months. That is less that half the time if you add just $40 per month to your payment. It doesn’t sound too unrealistic. In addition, you’d save thousands of dollars in interest costs over the years.
Saving $40 per month to do this is not that difficult. Skip buying the coffee from Starbucks or somewhere else, brown bag your lunch to work a couple times per week, give up smoking, eat out less. Do whatever it takes to pay extra on your debt as the impact is huge!
You can become debt free and save big on interest costs by consolidating your debt. Debt consolidation is when you gather all of your smaller accounts that are considered high-interest rate debt, and consolidate it or put it into one big pile. Once that is done, you take out one large personal loan to pay it down. The major benefit to debt consolidation is that the new loan you take out will almost always have a lower interest rate that any of the smaller, individual debts. More on debt and bill consolidation.
The lower interest rate on the new loan will make for a lower monthly payment on your monthly bills, and as a result of this lower payment, the debt holder can make additional monthly payments, thus paying off the outstanding medical or credit card debt sooner. As the example above shows, there are major advantages to paying off debt sooner, and remember the goal is to ultimately become debt free.
These three tips from a top publication are only several of the numerous ways that can help speed up the process of your debt reduction. Never give up the goal, and dream, of becoming debt free! Do not rely on bankruptcy, or some unlikely government bailout to help.
Many banks and lenders are beginning to be more open and more willing to forgive credit card debt and to help consumers in other ways. Communication is one of the keys. Learn more on how to get out of credit card debt.
Most state government have implemented laws and regulations to help people get out of debt, in particular payday loans. The interest on these types of loans can be in the hundreds of percents, and many people have turned to these salary advance loans in difficult times. Click here to learn about the laws for your state.
At the end of the day, it is important to eliminate debt and the money you spend each and every month on paying the interest for your debts. Reducing those monthly payments can free up your money for other types of bills and expenses that you may have in your life. Following these fairly simple tips and advice to get out of debt.
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