Tips on debt management
You pay your monthly minimums but the debt just doesn’t seem to decrease. Here are some effective ways to reduce the debt.
The first thing you should do is pay more than the minimum. Paying the minimum which is usually 2% to 3% of the outstanding balance, maintains a balance rather than decreasing it. Banks bank on you making minimum payments since the longer you take to repay the charges, the more interest they make. Also with less cash you have the more likely to add to the credit card.
Don’t get pulled into their trap, instead pay as much as you can each month. Find ways to increase the monthly payment. Sure you may have to make some changes in your spending but it is well worth it. Those few extra dollars do save in the long run. You will also be out of debt quicker.
Tip number two is to review your interest charges. You have now found some extra money to put towards the minimum, now choose the card with the highest interest rate and pay the most on that card. Paying more on the higher interest card decreases the amount of interest paid overall.
Once you have one card paid, keep applying this monthly allotment toward the other cards. Again, the majority of payment toward the highest interest rate.
Along these same lines, you could benefit by transferring your higher interest card balance to the card with the lower interest rate. This may require a little home work in determining if your card companies will permit this without too much added expense on your part. However, the initial transfer fee may be less when looking at the long term savings.
Be on the watch for special offers or promotions by banks and credit card companies for balance transfers or lines of credit. The low introductory interest rate could dramatically increase how much of the debt vs. interest paid monthly; thus shortening the amount of time you have the debt.
Examine the offer closely. Read the fine print so you know all the rules and regulations that are and/or will be applied to your balance transfer. You will want to know if the interest rate after the introductory period will be higher than you’re paying now.
It may be worth looking into cashing out your savings and investments to use the proceeds toward debt repayment. Sure, no one wants to do that, but sometimes it is the best solution.
There is still another action you can take and that is to request a lower interest rate from your current lender.
Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, your only recourse is to declare bankruptcy.
Ask for a new and lower repayment schedule; request a lower interest rate;. Make sure they understand that you want to pay them and not file bankruptcy. Faced with the fact that you may resort to such a drastic step, creditors will do what they can to protect themselves against a total loss.
The final check point is for you to do a free money search to look for unclaimed property and money. Nine out of ten Americans have money waiting to be claimed. There are billions of dollars being held by states looking to find the owner and return their money.
