Debt is one of those things that’s easy to get into, but difficult to get out of. Just about everyone has some form of consumer debt. Whether it be student loans, a mortgage, or credit card bills, debt is a staple in the lives of many. Though obtaining some debt is to be expected, when it reaches levels that span beyond your income and ruin your credit history, doing something about it is necessary. There are several methods and resources out there that can help you pay down your debts, you just have to know where to look. Below are a few solutions to consider trying.
Look at Your Budget
It may seem as though you’re unable to pay your debts when you’re struggling to pay your daily bills. However, a look at your budget and spending habits can sometimes turn up funds you didn’t know existed. Calculate all your monthly bills and compare that to your total income. Do you have excess funds after you’ve paid your bills? If not, you should review your spending habits to see where you can cut back to free up some cash. Whatever additional funds you have can be put towards paying down debts. If you still can’t reduce your spending, there are still other options for reducing debt.
Pay More Than the Minimum
When you’re dealing with debts like credit cards, student loans, or mortgages, you’re provided with a minimum monthly payment that must be paid to keep the account in good standing. This minimum balance also includes interest. If you want to pay your debts off faster, you should increase your monthly payments. Even adding an additional $50 to the bill can get you to zero faster and will also reduce the amount of interest you have to pay. When paying more than the minimum, be sure to state that you’d like additional funds to be added to the principal amount.
Transfer Card Balances
The biggest hurdle for those trying to pay off credit cards is the interest rate. Minimum payments help keep the account in good standing but don’t do much to reduce the principal balance. If you have credit cards with high interest rates, your best bet would be to consider a balance transfer card. Using resources like Credit Soup, you can compare credit card offers and apply for the best one. Companies offering zero interest on transfers are ideal. Transferring higher interest rates to a low or zero interest rate card saves you money on interest and gets the balance down faster.
Borrow the Money
If your income isn’t enough to cover your debts, then borrowing the money may suffice. There are several options for borrowing depending on your financial status. You might consider:
- Consolidation loans. A debt consolidation loan company typically provides you with a loan that is used to pay off your debts. You are then responsible for repaying the loan, but can begin repairing your credit in that outstanding accounts have been satisfied.
- Home equity loans. If you have equity in your home, you may be interested in taking out a loan to pay off your debts.
- Retirement accounts. For those who have a 401K or pension account, you may be able to borrow funds from the account. Keep in mind, however, you only have a limited amount of time to repay the funds and should you leave your job prior to paying it off, the balance will be required in full to avoid early withdraw penalties.
Renegotiate with Creditors
Sometimes, the biggest mistake you can make when trying to pay off debt is ignoring your creditors. This leads them to believe you’re deliberately avoiding your responsibilities which pushes them to take further action on collecting the funds. Contact your creditors and let them know that you’re struggling to pay your bills. Ask about smaller monthly payments, a decrease in interest, and even a settlement amount which is often less than the total amount due.
Earn Income
Last, but not least, if you don’t have enough money from your own income to pay off debts faster, earning income is easier than ever now. Check online for ways to earn extra money at home. Whether you answer surveys on the weekend, write a blog, or become a social media manager, you can put all the money you earn towards your debts.
Debt is a pain in the neck. Although it is normal to have some debt, once it gets out of control it can create a web of chaos and stress in your life. To minimize the amount of debt you’re dealing with, consider the above-mentioned solutions. Should you decide to borrow funds, be sure to repay them in a timely fashion to avoid falling further behind.
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