If you have debt, it’s time to start making serious steps toward eliminating it. Here are some tips from the experts for getting out of debt.
1. Determine your financial situation
While it may not be fun, you need to know how much money you are bringing in versus how much you are spending. This is often the hardest part since people don’t want to face the reality of how much they owe. Write down your monthly income on one side and all of your debts on the other side, along with the interest rate and minimum monthly payment. Now you have a much better idea of your financial situation. Learn more tips for reducing credit card debt.
2. Lower your interest rate
You can try calling your credit card company to negotiate a lower annual percentage rate (APR). Try telling your credit card company that you have been a loyal company for X amount of years and would like a better interest rate. You can mention other credit cards that are offering a lower interest rate.
Keep in mind that you don’t pay any interest on your credit card if you are able to pay the balance in full every month. The goal should be to get to a point where you are paying your credit card in full each and every month.
3. Refinance your house
If the goal is to pay off your mortgage early with a lower interest rate, you can refinance your house and secure a lower interest rate. Remember that refinancing often involves fees in the form of “closing costs.” Sure, your mortgage payment will probably go up, but the interest will go down, saving you a lot of money in the long run.
4. Set up automatic bill payments
You can pay off your debt faster by setting up automatic money transfers through your online banking portal. As your debt decreases, so will your interest rate.
5. Reduce costs where you can
Go over your spending habits and try to make cuts where you can. Are there any subscriptions you can cancel? What about expensive trips to the salon or speciality grocery stores? When you start tracking your expenses, it’s easy to find ways to save money.
Try the envelope method where you establish spending limits for expense categories. Put paper money into envelopes marked with the name of the category and the monthly budget.
To get started, think about:
- $150 for groceries
- $60 for restaurants
- $80 for gas and auto maintenance
- $80 for hair care/personal care
- $40 for personal/entertainment
How DebtBlue Can Help You Get Out of Debt
Debt Reduction (aka Debt Settlement)
Debt reduction involves negotiating with your creditors to reduce the total amount that you owe. Debt settlement is normally restricted to credit card debt, unsecured personal loans, and medical bills. While this could end up hurting your credit score, it’s a good option if you are falling behind on your payments and there’s no clear way to make more money.
Debt Consolidation
If you have several high-interest credit cards and the interest rates and fees are getting too high, you can look for a consolidation loan. This is a loan that consolidates all your credit card debt into one bill and one payment per month. The interest rate on the consolidation loan is typically less than the rate on your credit cards.
Contact the qualified debt counselors at DebtBlue for a free consultation. We can help you make the best decision for ridding yourself of debt.