Best Way To Reduce Debt
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Best Way to Reduce Debt

In this day and age it seems to be the norm to be in debt. Not many of us can say “I owe no one”. So the rest of us struggle with debt because we have become accustom to carrying such a high debt level. Most of us, instead of looking for ways to reduce debt we just keep adding more debt thinking we can somehow we can get out from under all this debt. But it never happens, we just plug along trying to meet the minimum payment requirements on our debts.

I have added below a few tips and techniques for the best ways to reduce debt.

1.Keep on paying minimum payments for the rest of your life and always be in debt to the credit card companies with no sign of paying the darn things off.

2.Tapping into you 401K account to get enough money to pay the all the credit card debt. This would not be a very smart thing to do. Because not only will you be losing your retirement money you will also be paying a high penalty and income tax for the use of your own money. Fact; almost 50% of all baby boomers will use all of their savings in the first 10 years of retirement.

3.Getting a line of credit using the equity in your home. If you have enough equity built up in your mortgage account you can use it to pay off all credit cards in full. Doing this is a big gamble though because if the price of housing takes a sudden dip you very well could go up side down with your mortgage. (owing more than the home is worth)

In today’s market this is very probably, not the best thing to do. Save the equity so if you sell you can get a little money back from your home.

4.Consolidation Loan, you will not find a low enough interest rate to make it work and you will not be lowering your payments any so why bother.

5.Transfer to 0% credit cards if you can still get credit of any kind. The kicker here is the 0% goes away after 6 months so now you’re stuck another high entrust credit card up to 10 to 15 % with the same or higher payments as before. Miss a payment and see the interest go up to 19% to 22%.

6.Consumer credit counseling; be very careful with this. Not all of these counseling companies are a place you’d send your Mother to. Some are good, some are bad. They all have one thing in common. You walk in fill out some forms with all information pertaining to your financial problems. If you like what you see and sign up for their program, the first thing they ask for is all of your credit cards. Once they have gotten all the cards they run them through the shredder right before your eyes. What will happen next is you will agree to pay them a fixed amount each month so they can distribute the money among the creditors. Sounds good so far, but after a few months you find out that the counseling company has reported this agreement to the credit reporting companies. This is very bad for you. So even if you were to pay all the debt through the Credit Counselor you will always have this red flag saying “I don’t know how to manage money properly, don’t extend credit to me”. I feel that your credit report is already tarnished enough without adding a red flag.

7.You pay off cards yourself. This method will take time and lots of discipline. To make this system work you need to be very serious about paying these debts off. You may have to sacrifice going to the movies or out to dinner every week, so if you can’t commit every extra penny after fixed expenses to this program you will more than likely fail.

The way this system works is you lay all your credit card statements out so you can see all of them at a glance. On a pad, list all the debts from the lowest balances first. When you have finished with your list, sit down and work out a Comprehensive Budget to find extra cash. You would be totally surprised what you can come up with by knocking off non essential items.

Here are some tips on figuring the budget. If you’re married both of you must make a list of things you can do without or cut down to a lower payment from the items listed in the budget. Some things that you could cut down on would be: the morning paper, cable television, cell phone service, gym memberships, nail and hair appointments, shopping just to shop, if you don’t need it don’t buy it. Gas; try to plan all short trips to include as many errands as possible, also make a route so you are going the shortest distance between stops.

Things not to scrimp on,

Things not to scrimp on,

·Fixed home expenses

·Insurance

·Education

·Health

·Medications

·Taxes

·Utility’s

·Home and Automobile Maintenance

Let me explain how this technique will work.

Let’s say you have found $450.00 in extra cash each month.

Example: Say you owe $2000.00 to the credit union. Your monthly payment is $125.00. Every month before the due date send in a payment of $575.00. The extra $450.00 goes toward the principle and not interest. So in roughly 4 months this debt will be paid off in full.

Now move on to the next lowest owed account. Visa Bank Card Service. The outstanding balance is $5300.00 your monthly payment is $319.00. When the payment comes due send them a check for $1019.00, that’s your regular payment of $319.00 plus the credit union payment of $125.00 plus the $450.00 you have extra, equals $1019.00. This account can be paid off in 5½ months.

Keep rolling over all the paid off payments plus the extra money along with the regular payment for each account you want to pay off. Do this over and over, soon all the debt will be gone.

If you follow this method you will find yourself debt free. It won't happen overnight and how long it takes will depend on how much of the principle you pay down each month, how much total debt you have, and how disciplined you are. But this method has worked for thousands and it can work for you as well.

This is the best debt reduction plan because you aren't just 'rearranging' your debt like you are with debt consolidation loans or other types of loans; you are actually paying it off completely.

Thank you for reading my article, I hope these tips have been of some help to you.

If you need more tips about debt or information about eliminating your debt, please visit my web site.


Street Talk

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