It seems to take no time at all to grow too much debt, then it may take years to eliminate it. Sometimes it is just too easy to buy things on credit or take out loans. The scary truth is, credit card companies want us to build up debt. Then they jack up the rates. Then they change the due date so you get late fees.
Before we know it we are in debt up to our eyeballs.
The first step stop getting into more debt. If you cut up all but one or two of your credit cards and stopped using credit all the time eventually you will eliminate all your debt. Easier said than done, don’t we all know. But stop and think.
If you set yourself a budget, living on cash only or close to it, and decided to get rid of your debt as soon as possible, you can do it!. Make a list of all the debt you have. This is everything that you pay to every creditor and includes any loans, credit cards, financed items such as the finance on your car or furniture and also the big one, your mortgage.
Find this out:
1. The total amount of the debt
2. What you pay every month
3. How many months you have left to pay
4. The interest rate you are being charged
This is the begining of a plan that will take you out of debt. It may not be a pretty sight after you add it all up. It may well be more than you thought it would be too.
Start with the highest interest debt and pay that down as fast as possible with the biggest payment you can possibly make. If you are real serious you would have also kept a journal of how much you spend every day for a week ot two and figured out some stuff youcan stop buying or buy for less. Take this extra money and use it to make the payments. Then do the next highest interest rate debt.
Since this lowers your interest cost it will be a big help to you as time goes by.
It might seem ridiculous that this can eliminate debt but it works better than you think and actually can save you a lot of money in interest!
Another approach is to sart paying extra on the smallest loan then this will be paid off the fastest. Once you pay this off, take the amount you were paying on that loan and use it towards paying off the next smallest loan. Many people like to use this method to eliminate debt because you can achieve a series of small goals, this will encourage you to stay at it.
Eventually you will end up with only your mortgage left which – if you take all the money you were paying on your other loans and put it towards your mortgage you can pay off a lot sooner too.
A third method is to target the largest payment you have to make every month and put as much extra towards it as you can, while paying the minimum on the other debts. You can also target the loan that has the least number of months left.Clearing the loan that takes the highest payment every month has the biggest effect on your bank balance every month. Clearing the loan that has the least number of monthly payments left has the fastest effect on your monthly bank balance.
With any of these methods, once you have paid off any debt, remember use the money you were giving to that creditor to pay the other loans off faster. Trying to eliminate debt this way is one of the bigger challenges so don’t do it unless you already know you can make a plan and stick with it.
Of course, if you have too many debts and your budget is totally maxed every month you might want to seriously consider a credit counselor to help eliminate debt. Or watch this video.
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