Reduce Your Debt
Sadly, many individuals today have lured into
no interest or low interest for a specified period of time, only
to find excessively high interest rates kick in if they are late
in a payment, or after an introductory period ends. That is on
top of the fact that the item being purchased probably couldn't
have been afforded in the first place.
Similarly, too many homeowners have given in
to the temptation to treat their homes like an ATM, withdrawing
cash against a home equity line of credit to pay for transient
luxuries like travel and vacations. The nation's overspending
will come back to burden it. If you sow seeds to the wind,
you'll eventually reap the whirlwind.
As silly as it sounds, many adults are afraid
to add up all their debt and actually face the amount they owe.
This must be done if you are going to reduce your debt. Get out
all your credit card bills and a notebook or electronic
spreadsheet, and start tallying them up.
For each debt, make a note of the balance and
the interest rate. Be sure to include any sums you have borrowed
from friends and family members as well. Don't bother noting the
minimum monthly payment; to actually reduce your debt you're
never going to pay the minimum again.
Next, find the debt with the lowest balance.
If the balance is under $500, pay that debt off right away.
Even if it is not the debt with the highest interest rate,
paying one creditor off completely, down to a zero balance, will
give you a valuable sense of accomplishment and confidence you
will need as you reduce your debt even further.
Identify which of your remaining debts has the
highest interest rate. Those are the debts that you must pay off
first. You must dedicate yourself to reducing you debt. Every
little windfall – every tax refund and holiday bonus – should be
put towards debt reduction. Similarly, the debts that have a low
interest rate can be paid off last.
It seems obvious, but it is so important that
it is worth saying, and repeating: you must stop going into
debt. While you are concentrating on debt reduction, do not
continue to incur new debt. You'll never make progress that way.
Don’t take cash advances on your home equity line of credit.
Don't take cash advances on your credit cards. Don't charge
consumer merchandise on your department store cards. Don't use a
gas card to pay for gas.
It will be this process that you use to reduce
your debt on your own. You could also consider a
debt consolidation loan.
If your credit score isn't high enough to qualify for one, the
next option would be to obtain some help from a professional
Debt
Consolidator. You should also check out the resources available in
Solving
Debt Problems.
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