Weekly Finance Tips

In recent times it’s common to have several credit cards and we often go frantic while shopping when the plastic cards are available in our wallet. This unreasonable spending lands us up in debt.

This article gives 8 simple steps to help you get rid of credit card debt.

1) Make a budget and stick to that:

First step to free yourself from the shackle of debt is to make a budget and sticking to it. But it might not be possible to create a budget unless you pay off your debts. Try to change your lifestyle so that you do not land yourself in the similar position gain. If you find your income is less than your expenditure and you are always tempted by shopping, it is the time to take severe steps to control it. If you are unable to do so then you might entrap yourself in debt.

2) Pay more than the minimum:

Fastest way to get rid of debt is to pay off the money each month. It is recommended to pay off more than the minimum amount per month. If you keep on paying the minimum amount then it might take years to pay off your debt.

The minimum balance column in your credit card statement structured to trap you into debt so that the debt settlement companies can hoard their account. Save penny by penny each month to pay off the bills.

3) Cash in investments:

The interest rates that are charged on the credit cards are much higher compared to any other prominent investment returns. Borrow money against your savings and pay off your credit card debts immediately. But make sure that you pay back the loaned amount. In case you face a mortal wound before settling the remaining balance, at the time of beneficiary’s claim for the money the due amount would be deducted from the margin as well as from the interest.

4) Ask help from family and friends:

Be smart to take help from your relatives as they won’t charge you interest on the loaned amount. In order to crawl out of debt this would be a good option as this loan won’t be expensive compared to other loan program. Repay the loaned amount immediately you have enough cash in hand. If you delay in returning the money then your peers would think twice before helping you next time.

5) A home equity loan can be considered:

Take a home equity loan if you have a permanent house to repay the loaned amount. The credit card interest rate is much expensive than the home equity loan. So shift from a 18% interest payment to 7% that is charged on a home equity loan to pay off your credit card debt as fast as possible. And you can display it on you tax returns and get the benefit of reduction on interest payment by 5%.

6) Take a loan if you have a 401(k) plan:

The 401(k) plan has the provision to take up loans against the investment plan The interest rate that is charged is 1 to 2 points above the normal rate. But this is still cheaper compared to the credit card interest rates.

But this method has a flip side to it if you change your job. As it takes 5 years to pay off the debt the moment you leave the job the debt transfers in to a due. And if you fail to pay the amount then it would come under taxable bill with an added penalty amount with the tax. So make sure to settle your loaned amount before you plan to change your job.

7) Negotiate with your creditors:

Try to talk to your creditor and explain the situation and give a valid reason why you couldn’t repay on time. Negotiate with him to lower the outstanding balance and the interest rate. If he is not willing to lower the money then threaten him of filing bankruptcy. This threat would help you as the creditor might agree on the terms of negotiation as he would realize that if you file for bankruptcy he won’t get a penny. Negotiation would be mutually beneficial as he would be able to recover his partially loaned amount and this deal would make things affordable for your pocket.

Consider a financial advisor:

Try to consult a financial advisor, with his able guidance you would be able to come out of the debt trap. The credit counseling services are also preferable option that paves the path for the debtor to come out of debt. The financial advisors can speak to the creditors to lower the monthly payment and the interest rate added to the amount. The repayment plan would act as a shield as it won’t devour your whole salary.

Try to avoid filing for bankruptcy even if you are neck deep in debt. The written above options can save you from drowning in the pool of debt.

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