DebtEliminationTips

With so many different debt solution out there it can sometimes be confusing as to what would make a good pick to fit your needs. It certainly doesn’t help that thereis a lot of mis-leading information designed to confuse you, in the hopes that they can sell you a product even if it wont work. Here are the guidelines I would use when considering a debt solution to meet your needs.

First question you have to ask yourself is what do you want out of your debt solution? . Are you just looking to handle one particular debt, several accounts or are you attempting to eliminate all your debt.

Some debt solutions will suggest for you to just make more then your minimum payment , while this will certainly help you pay the debts faster… is it enough? If you only had one debt to deal with this may be sufficient for you, but there are more efficient ways to increase your debt pay-off. Not to mention that if you did this for more then account at at time you will be spreading your money too thin and hardly making a big enough dent on your principal. So if this was the suggestion of the plan that I was reviewing it would be put on the bottom on my list.

Another very popular suggestion from other debt solutions are to attack your highest interest rate cards first before your lowest interest rate cards. While this may seem like a good idea in reality it is not and here is why , if you look at your goal of trying to eliminate your debt. Lets just say for argument sake that we an extra 75 dollars that we are applying, you pay less off of the account with higher interest due to the interest rate, so does this really make sense..?. You only have so much money typically to apply so best put it where it will efficiently work FOR YOU ….NOT THEM . I would be wandering who benefits from this type of setup and who stands to gain more them or you. The only exception to this is an 0% interest rate card, if you know you will pay it off before the rate will increase then continue that path. But if the card has a time limit before it will increase you should apply everything you can towards that card as it subtracts 100% from your principal. The benefit there would be that you have the possibility of paying it off, giving you the amount you were paying on it to use towards another card.

Now for the last debt solution that I am going to discuss today involves a systematic approach to eliminating your debts. Not knowing what you have to work with we will use and example I have created for demonstration. In this example we have three credit cards, a car payment, and a first and second mortgage. We will not even be looking at the mortgages or the car for the moment,, just keep making the minimum payments on those for now.

But here is how you would handle the credit cards and the reasoning behind handling them this way. Using your favorite spreadsheet program or paper if you prefer, line all your debts up from the lowest balance to the highest. You would continue to pay the minimums on the two above the one with the lowest balance, as the minimums decrease add that amount to the one with the lowest balance. Funnel all that you can towards that debt first, any funds above your minimum should be made as an extra payment on the first day that your credit card posts for the next month.  Let me explain that so it is clear why… lets say you have 50 dollars extra consistently not including the reductions on the minimums of the other cards, which you would add to this amount. If you apply it on the first day of next months billing period you will reduce your interest charges for approx 28ish days for the amount you have lowered your balance. This will have a big advantage for you as it will one lower your interest costs immediately and apply more towards principal. these two things in combo will dramatically reduce how long it takes to pay off that debt, once you are done you can then roll that amount back up towards the next debt , except you will now use that full amount to pay as the extra amount on the first day of that billing statement, once your credit cards are gone attack your car then your second and first mortgages. If you are motivated you can easily pay off everything you owe in 7-10 years, which beats 30 years assuming you don’t do a debt consolidation along the way.

Well I hope that this information has been helpful to you .

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Credit card companies are very unforgiving even in today’s economic issues that we are all facing. Miss one payment and they will increase your rates to a very high rate , this will cause each and every payment therefore after less effective. Now that you are in this situation doesn’t mean you give up , instead you should be working hard at correcting the issue . Here are the steps I would take to get your interest rates back down to a manageable level.

First off make sure you understand how you current balance to maximum allowed balance works. To keep from effecting your credit you should never charge more then 40% of your maximum credit limit. So if you have room on other cards and can get a decent balance transfer to a card you already own this would be a good option. The reason you would do this is to lower the balance on the card with the huge rate as it takes at least 6 months of spotless payments to actually get your credit card company to budge.

Now I realize that missing payments are not usually something you do on purpose but somehow you need to sit down and track your money so you do not miss anything, as a matter of fact you should have all your bills paid by the third week if possible.  at the 6 months mark you should be calling your credit card company and asking for a reduction in your interest rate . Never take the answer of the first person ask for a manager , Mention that you have balance transfers to other companies and would rather keep your money with them but the rates and charges are giving you little options . Chances are they will fight a bit but should budge at least a little bit .

If they do not want to play ball then ask then if they have any product upgrades or transfer to a different card such as a card with rewards. It is important ti use the terms product upgrade or transfer , they will more then likely find a card that they are able to transfer your balances . Here is the benefit as you are already a customer it is an internal transfer and you will receive the default rate for that card, this will likely take from the high 20% ratio to about 12-14% . This will save you a ton of money that you would have been loosing in interest charges on the higher interest rate card.

Now that you have successfully gotten your rates back down to a reasonable rate , do not miss a payment  as you will not likely have this option available twice.

Hope this helps and good luck

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Have you ever noticed that you have been paying your credit call bills but they never seem to really move in your direction. There are many reasons why this occurs and once identified can be corrected in your benefit , not your bank or credit card companies.  Following the steps outlined here will greatly increase your payment efficiency and help you get out of debt faster.

The first rule of thumb is that you should only be concentrating on one of your debts at a time for maximum efficiency. Spreading money out across multiple debts is not going to provide you the same impact as it will paying it on one source.

Zero percent interest cards should be the first on your list, if you happen to have any of them use them to your advantage. They are usually short term rates but will allow to reduce your overall balance quickly.

Even though you may be tempted to move around and attack different types of accounts you should consider the following before starting. Credit cards fluctuate in minimum payments unlike other types of debt and this will useful to you later. Once your interest free cards are gone you should line up your debts as follows.

Starting with the lowest balance card apply your minimum payment to this card no later then the 3rd week that it is due, using the amount that you had been paying on your previous card as an extra payment. Only pay this once your previous months statement posts so that this additional amount will reduce your interest for the next month and increase your principal payment amount. Doing this consistently month after month will show you an improved efficiency in reducing your principal balances.

If any of your other cards reduce their minimum payments roll that amount down to the debt you are concentrating on currently as part of your extra payment. This has the possibility of increasing this amount by 2 to 5 dollars a month and over time it will increase your efficiency even more.

Continue this pattern  until you have wiped out all of your debts and now you will have the ability to use the majority of your paychecks to plan for things like savings,retirement,and pretty much anything. The biggest reason that many are strapped is that they are using credit to it maximum, this is diluting your money every month. Changing how you pay back your current debt now will make a great difference on how long you stay in debt, how strong your credit will be and overall how much of the hard earned money you keep or give away.

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