Debt Solutions

Many people have debts.  Some debts are good, such as a mortgage or student loan and some are bad, such as credit cards or payday loans.  You always want to have the least amount of bad debt possible.  Reducing debt can be done with a plan.  It won't happen fast, but it will happen.  Try these debt reduction tips to help you focus and eliminate your debts. 

1.  Pay off your highest interest rate credit cards first.  You are better off owing $1000 on a credit card with an interest rate of 9% than to owe $500 on a card with an interest rate of 19%.  Pay a lot of attention to the type of debt your credit card has.  Even though your regular card rate may be 9%, if you had used it for a cash advance, those rates are much higher than the standard rate.  Many card companies will also allocate your payments to those portions of the debt with the lowest rate first.  One good reason why you should only use a cash advance on a credit card as a last resort. 

2.  Prioritize your debts.  Make sure that those debts you have which have the most serious repercussions for non-payment are always paid on time.  Mortgages and car payments top this list, as your home or your vehicle can be taken away from you for non-payment. 

3.  Pay more than the minimum due on your credit card statement.  Interest on credit cards is compounded daily.  You want as much of your payment to go to the principle as possible.  Anything above the minimum payment will be applied directly to your principle and you will end up paying less over the long term. 

4.  Do not take advantage of offers to skip payments.  When you pay more than the minimum payment, often times credit card companies will say that your next payment due is $0.  Do not give in to temptation to skip a month!  Interest compounds daily and you will end up paying more for this in the long run. 

5.  Transfer balances to a low or no rate card.  Shop around and find the longest term possible for the lower rate.  You want at least 9 months and make sure there is no balance transfer fee.  You don't necessarily need to apply for a new card, either.  If you have a card already with an available credit limit, ask the company if they can give you a preferred rate for balance transfer.  Many times they will do this for you.  Ask if the rate can be fixed for the life of the transfer as well.  It can't hurt to ask! 

6.  Pay all of your bills when they come in.  Don't wait until the due date to send your payment.  As discussed above, credit card companies compound the interest daily.  That means from the minute your payment is posted, you are accruing interest on your debt.  If you pay before your payment is due, you will pay less interest over the life of the loan and it will be paid off faster.