Pick up one of your credit card statements and look for a box, usually near the bottom, comparing total interest paid over 3 or 30 years. If you pay the minimum amount, assuming that you do not add to this debt, it will take 30 years to pay off that debt. The box will show you how much money that you pay in interest over 30 years. While a 30-year loan may be acceptable to buy a house (the interest rates are usually much lower as well as tax deductible) it is an enormous amount to pay for the things you purchased with that credit card. The same box on your statement will also show you how much interest you pay if you pay off this debt in three years. It will also tell you how much you must pay each month to get that debt paid off in three years. The total interest paid over 3 years instead of 30 is much more palatable. There are several options for getting rid of this debt: personal loans, debt consolidation, and a plan to pay down this debt are all paths forward.
Paying Down That Debt When Personal Loans Are Not an Option
Personal loans are a good way to consolidate all, or a part of, you debt into one loan. Sometimes this may not be an option because the interest rate may be higher than some of the creidt cards or the monthly payment may be bigger than all the minimum payments of your cards. Paying off your debt looks like a daunting task and you might be too frustrated to start. It’s not impossible and many people have done it. Start with small steps and you will get there.
Getting Interest Rates Lowered on Your Credit Cards
First, look at the list you made of your debts. The first thing you can do is attempt to get the interest rates lowered. Begin with the credit card you have had the longest and call them to ask if they will lower your debt. You can use this script. If you aren’t successful, ask for a temporary lower interest rate. Keep track of these conversations. If you cannot get an interest rate lowered, keep making your payments on time and try again in several months.
You may want to transfer your debt to lower interest credit cards. You can find various cards at www.credit.com and www.creditcards.com. This step should be taken carefully. Some credit cards have teaser offers that only have a low interest rate for a limited period of time. If you cannot pay the debt off in that amount of time, you may end up with a very high interest rate. Also, opening new lines of credit may negatively impact your credit score.
The Quickest Ways to Pay Down Debt When Personal Loans Are Not an Option
To create a plan to pay down your debt, you can follow what is known as the avalanche method of debt repayment. Take a look at your list of debts. Choose the one with the highest rate. Pay the minimum amount on all the other debts and pay the one with the highest interest rate with the most you can possibly pay each month. When you pay this debt off, use the amount you have been paying every month and add it to the minimum payment of the debt with the second highest interest rate and pay that amount every month. When that one is paid off, move on to the third highest interest debt. Keep doing this until it is paid off. The first debt may seem like it is taking a long time to pay off, but, after the first one is done, the rest get paid off quickly. This method maximizes the amount of savings by decreasing the amount paid in interest.
Another method of debt payment is to start with the one that has the smallest balance. When that one is paid off, move on to the next smallest balance. The advantage to this method is psychological: you start seeing debts paid off faster. You may not save as much in interest as in the avalanche method but it might be easier to stay motivated with this method.
Don’t want to do all that math? There’s an app for that! If you have an Apple device, you can use Debt Payoff Assistant available in the Apple store. If you have a Google device, Credit Card Payoff is available on Google Play. For those who’d rather have a web-based program on their PC, there’s unbury.me. The nice thing about these apps is that they will also give you a date when you will be debt free.
Breaking Your Bad Spending Habits
Look at the list you made of everything you spend in one day. From this list, and some other things you may spend money on but didn’t on the day you made the list, pick three things that you can give up. Don’t pick more than three, you still need some fun money. Use the amount you spend in a month to add to that monthly debt payment.
TGUC Financial can help you with credit card refinancing and debt consolidation to make your debt repayment process move faster. Contact us today.
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