If you’re tired of reminders being sent in the mail that you owe debt, or have been hitting ‘ignore’ on the phone when you know your credit card company is calling, you should consider accepting the inevitable: you are in debt and you owe money. But all hope is not lost; here are some simple ways to pay off your debt sooner than you thought possible.
Step #1 More is Better
Whoever said “less is more” was wrong when it comes to paying credit card minimums. Paying the minimum (typically 2% or 3% of the total debt owed) simply delays the pain of paying what you owe. Create a long-term financial budget that devotes more than what’s required to pay your bills. If you’re unsure where to fuel the extra finances, start scrimping and saving. Say ‘goodbye’ to those skinny iced lattes or brown bag your lunch. You’d be amazed to know that your $8 work lunches amount to $3,000 a year on just that one midday meal!
Step #2 “C” is for Consolidate
If you have outstanding debts on multiple cards, consider combining them into one lump debt. Examine each credit card’s interest rates, and if possible, transfer higher interest rate debts to lower interest cards. Keep an eye out for promotions offered by credit card companies. Often, these companies will offer significantly lower interest rates that could save you money. The money you save by consolidating can be put toward your monthly payment.
Step #3 Tap into Your Savings
Sure, you’ve been saving up to take a fabulous vacation in the Cayman Islands, or you’re looking to retire at the ripe age of 38. Using your savings toward your debt might be a painful reality to face, but it’s a worthwhile option. The higher the interest rate on your debt, the better this decision is.
Step #4 Talk it Out
Creditors do not know who their individual borrowers are. Let yourself be known! Contact the companies and tell them your situation. They might assume you’re just withholding the money. If you’re having trouble making payments, some companies will re-negotiate terms of the debt owed, which may result in lower monthly payments and interest rates. You’ve got nothing to loose!
Step #5 File for Bankruptcy
Consider filing for bankruptcy as a last resort for individuals seriously in debt. Before filing, consider all the repercussions that will result from this drastic action. Credit companies will retain your bankruptcy information for an entire decade, so for the next 10 years, you’ll have trouble getting credit. Also, as ludicrous as it sounds, filing for personal bankruptcy costs money! Attorney and court fees quickly amass, and in this situation, must be paid prior to become bankrupt.