Personal Credit Repair: Ways to Pay off Debt
A Credit Article Contributed by Brandie King
The most critical part of repairing your personal credit is to get everything paid off. This article will help you in that area by showing you different ways that you can pay off your debts and begin the process of repairing your personal credit. The following steps to repairing your personal credit are listed in the order you should do them in.
Personal Credit Repair: Monthly Minimums
Always, and I repeat always, pay more than the minimum amount due on all of your credit cards each month. When you only pay the minimum required amount each month you are barely even covering the interest and you will soon realize that your balance is going down painfully slow. By paying more than the minimum required each month you will be reducing the overall amount of interest you have to pay, which will in turn help you to pay off the balances much quicker.
Personal Credit Repair: Pay the Highest First
Make a list of all of your credit cards, the interest rate for each one, the total amount you owe on each one, and the minimum monthly payment required on each one. Put the list in order starting with the card that has the highest interest rate and ending with the card that has the lowest interest rate. Start paying not much more than the minimum due on all of your credit cards except for the one with the highest interest rate.
Pay as much as you possibly can each month on the card with the highest interest rate, even if that card doesn't have the highest outstanding balance. Once you have paid that card off, move on to the card with the next highest interest rate, and continue until all of your credit cards are paid in full. As you move from card to card after paying off the previous ones, make sure that you take the money you were spending on the previous cards and pay it on the current one.
This will allow you to pay off your debt much faster without having to spend any extra money each month.
Personal Credit Repair: Home Equity Loan
If you have been making mortgage payments on your house for very long then you most likely have equity build up. Equity is the difference between the appraised value of your house and the amount you still owe on it. You can take out a home equity loan, which is also know as a second mortgage, and use the equity to pay off all of your credit cards. This is, in effect, a type of debt consolidation.
The interest rate on a home equity loan is normally much lower than the rates on any of your cards and you will have just one single monthly payment to make each month. To make this tactic work, though, you have to make sure that after paying off your credit cards with your equity you do not charge anything on them at all. Keep the balances on your credit cards at $0 to keep yourself from getting right back into the situation that caused you to need the home equity loan in the first place.
*** Personal Credit Repair: Negotiate with Your Creditors
You've tried everything you possibly can and still have debts left to pay. You are probably thinking at this point that there is nothing left for you to do except file bankruptcy. Think again. Call your creditors and let them know your situation. Tell them that you would like a new, lower repayment schedule and interest rate. Make sure they know that if you don't get these new terms you will have no choice but to file bankruptcy because you can't repay them under the current agreement.
Quite a few creditors will be very willing to agree to the new terms because this way they get paid; with bankruptcy they will not get anything.
