Attacking Your Debt From All Angles
The following is a guest post by Jasmine from Check N’ Go.
With the miserable state of the economy today, some are desperate to find ways to reduce their debt without filing bankruptcy or losing their home and savings. The sad reality for many is that bankruptcy and foreclosure are the only events on their financial horizon.
In order to attack debt and free yourself from financial woes, it’s going to require some creative use of existing resources and changing the way you approach debt reduction.
Change Your Habits
For those with large amounts of credit card debt, it can be difficult to find the extra money to pay even the minimum balance on some of their cards. But a little effort can go a long way and extra cash can be made available for paying more than the minimum on at least a few credit card balances.
But this will entail some lifestyle changes. Reducing the amount of money you spend on convenience such as fast food, lunch out at work or luxury weekend dates can provide an untapped resource for cash that can be used to pay more than the minimum on credit cards.
What about downsizing your car? Taking public transportation more often? Imagine the money you could save by not having to fill up your gas tank every week!
Living beyond available means is probably the most common way many people get into debt in the first place! Lean towards a simpler way of life and not only will you pay off your debt faster, you may even learn to appreciate the freedom simplicity offers.
Get A Low Interest Credit Card, Or No Credit Card At All
Another method for reducing credit card debt is to shift the balance from your high interest card to a low interest one. Beware though! Credit card companies are catching on and imposing fine print penalties for trying to carry over debts.
While shifting balances from higher interest cards to lower interest cards is a time honored tradition among those looking to reduce their monthly payments, consumers must use this process carefully now, as credit card companies are now offering introductory 0% interest for six, eight or twelve months with fine print that consumers often miss.
Little known to most consumers, there are now catches involved with that 0% introductory rate that often require consumers to not transfer their balances to other cards for a period of time that is longer than the introductory rate.
Shifting balances from high interest cards to new no interest cards is great, as long as consumers follow the rules. If not, consumers can often find themselves in a worse situation than before. Transferring balances frequently, or “card-hopping”, can incur significant penalty interest fees if not done correctly. If a consumer is looking to transfer their debt to a low interest card, from a high interest card, get an airmiles card, or any other benefits type card for that matter. This can allow for travel and vacations without costing a significant amount of ready cash.
Take Out The Big Guns
Other options for bringing down your debt could be taking out a home equity loan, cashing out a 401K, taking a loan against a life insurance policy, borrowing money from friends and loved ones. However, these options are often out of reach for most consumers in serious financial trouble.
At that point, you should look into trying to settle your credit card debt, for less than the total owed. You can try renegotiating the balances on credit cards and loans directly. Not all credit card companies are going to go for this, especially if the consumer has chronic late payments or overcharges. But if the majority of your payments are on-time and within their credit limits, debt settlement can be a great alternative for reducing balances and interest on debt.
If renegotiating does not work, often the threat of bankruptcy will force the credit card company’s hand to reduce the balance or interest on a card. The credit card company does not want a consumer to default on their debt, as they rarely get paid anywhere near the balance owed in a bankruptcy settlement.
If all else fails, or the debt amount is too extreme, bankruptcy may be the only option. Prior to filing for liquidation or restructuring, you should exhaust every other method available, both common and uncommon.