With the miserable state of the economy today, some are desperate to find ways to attack their debt. People want to avoid 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 your debt and free yourself from financial woes, you need to be disciplined. It’s going to require some creative use of existing resources and changing the way you approach debt reduction.
Change Habits And Attack Your Debt
For those with large amounts of credit card debt, it can be difficult to attack your debt. It can be a struggle to find any extra money to pay even the minimum balance on your credit cards. But a little effort can go a long way.
You have to be determined if you want to attack your debt. Your efforts can set aside extra cash for paying more than the minimum on at least a few credit card balances.
But this will entail some lifestyle changes. Reduce the amount of money you spend on convenience such as fast food. Give up dining out and luxury weekend dates. Changing how you spend can free up small amounts of cash. That in turn 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. 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.
Shifting balances from higher interest cards to lower interest cards is one way to reduce monthly payments. This process is called making a balance transfer.
But, consumers must use this process carefully now. Credit card companies are now offering introductory 0% interest for six, eight or twelve months. But there's fine print that consumers often miss.
Little known to most consumers, there are now catches involved with that 0% introductory rate. They often require consumers not to transfer their balances to other cards for a period of time 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. You have to be able to act responsibly with your finances. Borrowing money to borrow more money can be detrimental if you aren't careful.
Do you want to transfer debt to a low interest card, from a high interest card? Choose the card carefully. At least get an airline miles 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.
Attack Your Debt With The Big Guns
Other options for bringing down your debt could be taking out a home equity loan. In addition you could cash out a 401K, take a loan against a life insurance policy, or borrow money from friends and loved ones.
However, these options are not ideal. Plus, they 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. Credit card companies don't want consumers to default on their debt. When that happens, they rarely get paid anywhere near the balance due 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.
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Taking control of your debt is priority one! More importantly, finding out what caused the problem in the first place is equally important. As you pay down your debt, you have to stop the habits that created it must change. In other words, harness the effort that pays down the debt to restrain spending that put you in debt.