Paying down personal debt is a problem for many people. If you are having trouble making the monthly payments, then it may be time to begin a program for debt reduction. This article will help you reduce credit card debt and much more. Here are some solutions and tips to get you started and help with debt problems:
- Stop spending. If you are serious about debt reduction, then the first thing you must do is stop spending. Put away your credit cards or cut them up. You should also avoid situations where you will be tempted to spend money.
- Write down all of your debts. Many people are in denial about how much debt they actually owe -- they just pay the minimum payment on their bills each month and ignore the grand totals. In order to set your budget for debt reduction, you must first be honest with yourself about how much you really owe.
Write down the names of all of your creditors and the total balance that you owe to each of them. Then add up all of your debts to see how much debt you actually owe. You don't need to wait for the bills to come in before you do this -- most credit card companies have websites that you can login to see your most recent transactions, balances and your current interest rates.
- Track the interest rates and monthly payments. While you're writing down each of your debts, make sure to write down what the interest rate is. The interest rate that you pay is a key factor in helping you reduce your debt. The monthly minimum payment is the absolute minimum amount that you must pay every month -- and smart consumers pay much more than the minimum each month.
- Tackle one bill at a time. It can be tough to reduce credit card debt. Once you have a clear idea of what you really owe, devise a plan to pay off each debt -- one at a time. Start by paying more than the minimum payment on the debt with the highest interest rate. Maintain your good credit standing by paying the minimum on all of your other debts.
- Use extra money to pay down your debts. As you pay off a debt, use the money that you normally would pay on it towards your other debts. It is best to pay the additional money toward the debt with the next highest interest rate. By increasing your monthly payments on your other bills, you will pay them off much faster.
- Cut up credit cards, but don't close the accounts once they are paid off. Once an account is paid off, don't look at it as a license to start spending again. Instead, cut up the card but keep the account open. Open accounts with no balance on them will help to improve your credit score.
- Some final debt solutions and tips. Here are some final notes to help with debt problems. It may be beneficial to transfer your higher rate balances to lower rate cards by taking advantage of balance transfer offers -- but only do this after you read all of the fine print in the offer.
Also, beware of using the equity in your home as a means to paying off your unsecured credit card debt. While home equity rates may be lower than credit card rates, if you're not disciplined and you begin using the credit cards again, you may end up with a big equity loan as well as more credit card debt.
Finally, if the interest rates on your debts are so high that you can barely afford the minimum payments, pick up the phone and call the lenders. You may be able to have your interest rates or minimum payments lowered. If the minimum payments are still beyond your means, it may be time for professional help from a reputable agency like Consumer Credit Counseling Service.