The Five Steps to Debt Relief
Debt is something a lot of us have in common. Whether your debt is because of a less than positive job market or simply because you have fallen on hard times due to over-spending or medical bills, it is still a financial monster that must be handled effectively. You do not want to reach the point where you are afraid to answer your phone because it is a creditor demanding payment. It is no fun getting nasty letters in the mail either with the threat of a lawsuit. You want to avoid these actions at all cost and the negative information that will be included on your credit report. Now more than ever it is important to try and keep your credit clean.
There are a few steps you can take to keep yourself out of debt or at least in a position where you can sleep at night. These steps are intended for use in your daily life and need to be considered with a healthy dose of common sense. You did not accrue your debt in one day. It will take longer than a day to get out of it. The key is to be diligent as well as patient. Before you know it, you will feel the relief of reducing your debt so you can become debt free.
The first step, which may be obvious, is to spend less money. This is a critical step that will help you reduce your debt the quickest. Of course no one wants to hear this step because it means giving up luxuries in which you may have spoiled yourself. If you spend more money than you make then it is time to trim your expenses. You will need to incorporate the theory of spending less and begin to spend more cautiously. When you consider how you can spend less money, think about habits that you need to quit such as smoking or drinking too many sodas in a day. The idea is not to hurt yourself, but be reasonable, some of your current habits may be hurting you and costing you more money than you have to spend.
Next you will want to look at your credit card debt. Single out the highest interest rates and you will find the culprit that will keep you in debt the longest. Good debt is considered to be debt that has a percentage rate of ten percent. Bad debt is anything that is over ten percent for any credit lines or credit cards you are carrying. Make a list of all these debts and keep the highest percentage debts at the top.
Your goal is going to be to pay these off first. If it helps you can highlight them or use a red pen to underline them. You can create a monthly budget of all the expense that are normal, i.e. clothing, utilities, groceries, mortgages, car payments and medications, and see where you can cut your spending and save money.
The money you save by figuring your budget can be applied to the highest paid interest rate credit cards. If you find that you do not have much money left over after figuring out your monthly budget, then you may want to consider a consolidation loan to help you make high payments that are currently crushing you financially. The idea is to get rid of this debt before it can become a major problem that is very hard to crawl out from underneath the burden.
If you have a credit card that has an annual percentage rate that is thirty percent, you need to pay it off as quickly as possible. These types of credit cards do exist and are very bad for consumers that actually use them. You will pay back more to the creditors than you borrowed in the long run, and the amount you end up paying back can be over fifty five percent of what you already own.
You may have thought you were getting credit and only paying back what you used. The truth is you are paying back what you used in credit and a significant amount over it. If you do not have enough money to pay this credit card off, then consider selling something of value that you do not use on a daily basis. It cannot be expressed how important it is to get rid of this type of risky debt. The interest payment will put you in more debt the longer you keep the account.
The idea that you need many credit cards is false. You should pick one credit card out of all the credit cards you keep based on the low annual percentage rate and nothing else. This is the credit card you need to use for emergencies only. The lower the interest rate is the better off you will be if you need to use it. The rest of your credit cards need to be cut up into tiny pieces so you can dispose of them. The more credit cards you keep, the higher you risk using them and sinking deeper into debt.
This next step is one that most people do not realize they can take. When you have been issued a credit card, you have become a customer for that credit card company. They are loaning you money on credit so you can spend it. They are providing a service to you. You are their customer. Let that sink in a moment. No matter what position you are in financially with this creditor, you are still the customer in the situation.
Call your credit card company if you are having issues with your percentage rate. Speak to them and request a lower interest rate or you will no longer use their services. It is important to remain calm and firm with a nice tone that is not condescending. Nicely let them know that you have received other offers with interest rates that are lower and you want to know if they can match those new lower rates or possibly beat them.
If you work from the angle of customer loyalty, given you have made continuous payments in a timely manner, then you are tempting them to start working in your favor and lower your interest rates. You may have to talk to them for quite some time and do some heavy bargaining, but it is an option that should not be ignored. You have nothing to lose by asking. Most credit card companies would rather lower your interest rate rather than lose you as a customer.
Finally, it is a good idea to seek advice from people that are in the same position as you when it comes to ridding yourself of debt. You can do this by finding message boards on the internet. Chat with people that have the same issues and you both may find that you have great advice for each other that will help you learn new tricks to find more debt relief.