Reduce Your Debt with These 6 Tips
Chief Executive Officer at Secure One Capital
It is never pleasant to realize that you are in the financial hot water, but pretending the situation does not exist, is NEVER the way to deal with the problem.
If you are having trouble meeting monthly payments, find yourself borrowing or using credit cards to meet daily expenses or have one or more of your credit accounts turned over to a collection agency, it is time for you to get proactive and bring your debts back under control.
Below you will find six ways to reduce your debt. Some take time, all take some level of commitment and effort - but it is worth putting in the time to start cleaning up your debt situation.
1. Develop a Budget and Stick to It
The first step toward getting control of your finances is to assess your situation realistically. Sit down and draw up a budget that takes into account all your income and expenses.
First, list all your income.
Then, list each of your 'fixed expenses,' the ones that don't vary from month to month. Those may include your rent or mortgage payment, your auto loan payment and your utilities, if you are on a budget plan to pay for them.
Next, add in necessary expenses and payments on bills that vary from month to month, i.e.: food, household needs and credit cards
Finally, list all your daily and regular expenses for entertainment, transportation and the like.
Your goal is to develop a budget, which lets you meet all of your monthly fixed expenses and figure out where you can cut expenses to start paying down your credit card and other debt.
2. Contact Your Creditors
Communication is one of the best tools to help you through difficult financial times. Your creditors would prefer to NOT take stronger measures to collect the money that you owe them. After all, it costs them more money to refer your debt out to a collection agency.
As soon as you know that you are having trouble making ends meet, call your creditors and explain the situation. In most cases, they will be happy to work out a modified payment plan, which will make it easier for you to meet monthly expenses.
It may mean extending the period of your loan or renegotiating the terms of a loan agreement, but in the short run, it will take the heat off and in the long run, it will save your credit rating.
3. Pay Down Your Highest Interest Loans
While it is not a good policy to pay only the minimum payment on credit cards, revolving loans and lines of credit, there is one exception. If you have one or two high-interest outstanding debts, one of the better ways to get control of your debt is to eliminate them as quickly as possible.
It is time to engage in a technique that we call, “Snowballing!”
· First, stop adding additional debt.
· Commit to making the minimum payment on all of your outstanding debt.
· Find an extra $50, $100 or more to dedicated toward being debt free. You may be able to use step 2 above, to free up some money. We will call this “found money.”
· Consider steps 4 and 5 below to help you reduce payments and/or interest rates. More “found money!”
· Identify the two debts with highest interest rates.
· Of the two, choose the one with the lowest balance.
· Focus on that account first, make the minimum payment, plus the found money and continue making the minimum payment on all other debts.
· Once the first high-interest account is paid off, take that payment, plus the found money and add that to the minimum payment of the next account and make the increased payment until that account is paid off … again while maintaining your minimum payments on all other debts.
· Next, I would focus on the debt, which has the highest monthly payment and repeat the process or snowball, choosing accounts, which you can eliminate or pay off, most efficiently.
· Celebrate when you are debt free!!!
4. Transfer Your Balances to Lower Interest Loans and Lines of Credit
If you have outstanding debt on high-interest loans and credit cards, your finances can benefit from moving the balances to a lower interest credit card.
Credit cards with 0% introductory rates for six to twelve months are widely available right now; as are low-interest balance transfers.
Take advantage of one to transfer a high-interest loan and pay it down during the introductory period.
5. Get a Debt Consolidation Loan
A debt consolidation loan makes sense if you are paying on several different debts with varying interest rates.
You may consider a home equity line of credit, which is a second mortgage or refinance your total debt into a new first mortgage. By taking out a home equity you can take advantage of a new loan with a longer payment term, tax advantages and lower interest rates.
By reducing your, monthly loan payments, you will have freed up resources for savings, investments or additional capital to accelerate the payoff of your home loan.
6. Find a Mortgage Lender to Help You Accelerate the Payoff of Your Home
Once you have consolidated your debts into a simple interest, tax deductible, mortgage loan you should have additional cash flow, which you can put to work for yourself.
Secure One Capital Corporation is an exclusive provider of HOAP HomeOwnership Acceleration Program, which allows you to accelerate the payoff on your home loan after the consolidation of revolving and installment debt. Why not BEAT THE BANK!!!
You can find additional information online at: www.secureonecapital and www.jimpate.net.