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With the cost of living increasing on a daily basis and wage increases coming at a much slower pace, a large number of Americans are finding themselves deeper and deeper in debt. Unexpected circumstances such as medical expenses, home repairs, automobile repairs, and rising gas prices have put many of us into financial strains. Some have even been driven into bankruptcy.
If you find yourself in the category of being overwhelmed with debt, there are certain steps that you can take to relieve yourself of some of this debt stress and actual debt. You may not immediately eliminate your debt but your can surely reduce the actual debt and the interest connected with it to a more manageable level.
With the process of filing bankruptcy becoming more difficult and the rise in interest rates now taking place, the burden becomes heavier for the general public who have incurred some of this debt. A lot of it is controlled by variable interest rates. It is time to sit down and look at the most beneficial and effective ways that this debt can be reduced.
Here are a few suggestions that may help you get this debt under control:
1 - The first and probably the most important of all steps that you can take, if you are married or living with someone, is to sit down with your spouse or partner and look at the bills together and come up with a plan and budget that will assist you during the process. To often, we hear of one person trying to control the spending while the other "throws caution to the wind" so to speak. Credit and credit cards can be addictive. One person usually handles the bill paying while others are not completely aware of what is happening to the money.
2 - You will need to list all of your bills starting with the most essential ones such as the home mortgage and automobile loan. You must have a place to live and a means of getting to work. Next, you should list the other bills beginning with the largest balances first and go in a descending order. Mark each bill that is essential each month such as the light, gas, telephone, etc. Beside each bill, list the interest rate and due date. Remember, if you are making a minimum payment on each and you are sending the payment in late, you stand a risk of most of the payment going to a late charge and interest and little or none going on the principal.
3 - Your next step would be to prioritize your payments by paying off any small bills that you have. Once these are paid off, put the extra money on the bills with the largest balances concentrating on the ones with higher interest rates. Remember that anything additional goes to paying off the principal. If possible, you should double the minimum payment. This will greatly decrease the total time of the debt thus reducing the amount of interest paid.
4 - Once you have paid off some of the cards, do not charge on them again and notify the card company to cancel them from your name. Be sure that he high interest rate cards are not used even in emergencies. When you are introduced to most credit cards, the interest rates are very appealing but with one or two late payments, the rates increase to a much higher rate. Some cards look at your payment history on other cards and determine an increase from them. It is very disheartening to get a very good introductory rate and loose it after you have charged on the card or taken balances from higher interest rate cards. Be careful if transferring balances from other cards.
If this is done to often, it can damage your credit rating and you can still end up with a high interest rate.
5 - You will want to check your credit reports and credit score. Both of these can give you a better insight into what you need to do to get your debt reduced. There can also be errors on the report that may hurt your credit score in the future. As bills are paid off, make sure that they are properly reported. Having a good knowledge of how the reports are processed and what is recorded can help you get a handle on your debt reduction process.
6 - You may want to get outside help if this seems like the only way out for you. The forms of help can range from counseling to debt reduction firms. The counseling can help you get your spending under control while the debt reduction firms can help you negotiate with your creditors for better payment options and lower credit card balances. They can also help you consolidate your total debt.
7 - If through all of the other processes or by some misfortune you are still debt laden to the extent of being unable to get cleared, as a last resort you can look into the possibilities of obtaining a home equity loan. If you are fortunate enough to do this, just remember that you are putting your home up as collateral and could possibly loose it through foreclosure if the payments are not kept up. If it comes down to a home equity loans you must have your spending under control. There are several advantages of paying home equity loans over paying credit card debt. (A) The interest rate is usually lower. (B) Often the interest payments are tax deductible. You have to itemize when filing at the end of the year to get this benefit.
Remember, with all or any of the steps above you must condition yourself to have self control and discipline. This is the only way that you will see yourself clear and stay there.
Charles Oxford
GetawayCrafts
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