Being deep in debt can cause a number of problems – everything from damaging your credit score to making it difficult to get loans. Luckily, there are some fairly easy ways you can get rid of that debt and get back on the road to fiscal fitness.
Get out of debt
- 1. Cut spending
Obviously, there are things you have to buy, such as food and clothing, but getting serious about getting out of debt requires that you cut down on other things. For instance, maybe you can cut out a weekly pub visit or two and direct the savings toward paying off your debt.
- 2. Cut up your cards
This is a drastic move, but if you don’t have ready access to credit cards, you are unlikely to spend money you don’t have. Keep one card for emergencies, and destroy the rest.
- 3. Get a plan
To get rid of your debt, you’ve got to have a plan for paying it down. There are different methods you can use. Some people like to concentrate on paying off the smallest debt first, because you get it paid off faster and get a psychological boost. Another method is to pay off the debt with the highest interest rate first, which saves you the most money in the long run.
- 4. Don’t pay late
Making late payments not only hurts your credit score, it also adds late fees and finance charges to your bill that make it more difficult to get it paid off.
- 5. Ask about lower interest rates
If you have good credit and have been making your payments on time, ask your credit card company if it will consider lowering your interest rate. This will lower the amount of finance charges you have to pay every month, which will help you pay off your debt faster.
- 6. Consolidate balances
If you get an offer for a balance transfer with a lower interest rate, take a good, long look. If it offers a significantly lower interest rate, it’s likely worth it, even if there are fees involved. The lower interest rate will save you money over the long run.
- 7. Direct any extra money to debt
If you get a bonus at work or unexpectedly inherit money from aunt Frances, use all or most of it to pay off debt. It may be tempting to buy a new TV or finally get season tickets for your local football club, but paying debt should be your priority.
- 8. Find ways to generate extra money
While unexpected found money is great, it’s not realistic to expect some. Instead, make your own luck. See if there are any extra shifts you can pick up at work or sell some stuff you don’t need.
- 9. Use a rewards card
This takes discipline, and if you are in debt because of out-of-control spending habits it could be risky, but getting a cash-back rewards card could help you cut your debt. The trick is only to use the card for necessary purchases — food, petrol, etc. — and then pay the bill in full every month. You can use the cash back you generate to help pay down your debt.
- 10. Ask for help
If your efforts aren’t paying off fast enough, don’t be afraid to ask a family member for help paying off your bills. The worst that can happen is they say no.
Helpful Resources:
http://www.cbo.gov/publication/21625
http://www.publicdebt.treas.gov/whatwedo/bpdstrategicplan09-14.pdf
This entry was posted on Monday, July 22nd, 2013 at 4:27 pm and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.