Tips To Free yourself of debt
Debt has two faces. The face of the friendly lender (Bank, Credit Union etc) who is there to help you in your time of need. And the face of the incessant agent calling to follow up on overdue payments.
Debt is a bit of a bitter sweet affair but the bottom line is, looking at your bank statement every month soon becomes a nightmare as month after month you find that for all your efforts, you actually have nothing in the bank to show for it. Eradicating debt is the first step to taking back control of your finances.
Know your finances
This is the single most important thing one must be aware of if they are to not only get out of debt but also achieve financial success. Every month look through your Bank and Credit Card statements and analyse each and every transaction making note of any unfamiliar entries. Query these immediately with your institution. Having this intimate knowledge of whats going in and out of your account will allow you to make more informed decisions regarding your finances.
You have already borrowed money to get everything you 'own'. Now STOP SPENDING!
If you really look at the things you own at present, there is really no NEED to keep buying more. The less you spend on additional debt, the more you are able to contribute towards eradicating your existing debt.
Prioritize your debt
Don't try and settle all your debt in one go. Not only will this require more immediate outflows (which you may not afford) it may also mean you take longer to settle all your debts.
As a rule of thumb, pay off the higher interest debt first as this will result in you paying less interest overall on your debt. It may also be advisable to dedicate one huge payout towards settling the smaller debts to allow you to have fewer monthly obligations. This will leave you with additional income each month which can be channeled towards settling the higher interest debts.
Firms offering credit are in competition and will always try and get business by offering the most attractive rates.
Contact your credit card company today and ask for your interest rate to be lowered. Factors they consider will include whether your payments have been on time and what your credit score is etc. If they say no, tell them you will be shifting your balance to a card with a lower interest rate. This may prompt them to review your interest rate in order to keep your business. If they still refuse then do just that, shift your balance to a lower rate card.
This is when you transfer your existing debt to a credit facility with a lower interest rate.
You should by now have experience with how credit facilities work and you should use this when you transfer to the new facility. Understand fully all the terms and conditions before finalizing the transfer. While the nominal rate may be lower there are other costs to consider like transfer fees, late payment penalties etc. Carefully consider these before finalization anything
Always pay more than the minimum required
Paying more than the required minimum is beneficial two fold. Firstly, it improves your credit scoring and secondly it allows you to settle the debt quicker thereby paying less interest overall.
Minimum payments are calculated as a percentage of the outstanding balance each period end. What this means is that as you reduce the balance you owe on your debt, the lower the minimum payment required. This shouldn't be an excuse to lower your monthly payments though because remember, you want to get out of debt - FAST!
Maintain your debt free status forever!
Once you are debt free start maintain your lifestyle. Those funds that were going towards debt payments should now go towards savings - not just any savings. But high interest earning savings accounts which will ultimately reward you financially.