Credit Card DebtThere is almost
nothing more troublesome than having too much debt to pay each
month. Consumers incur debt for many different reasons.
Sometimes illness, accidents, or just bad luck can make it seem
impossible to get finances under control. Other times it is
simply because we spend more money than we earn. The first step
toward taking control of your financial situation is to learn
how to eliminate your credit card debt.
Develop a budget. Start by listing all sources of income.
First list fixed expenses such as mortgage payments, insurance
premiums, and auto loans. Next, list the expenses that vary from
month to month such as utility bills, recreation and clothing.
If there is any hope of controlling your credit card debt you
must create and stick to a budget.
There are different kinds of debts. Mortgages and auto loans
are debts secured by collateral. In the event of default on a
secured debt, a lender may foreclose on your home or repossess
your car. Unsecured debts are loans with no collateral and often
have variable interest rates and are assessed a fee for late
payments. In the event of default on an unsecured debt a lender
may report to a credit-reporting agency, contact the debtor
repeatedly by mail or telephone, and in general make life
miserable for those who find themselves in financial trouble.
If you are among the millions who have found themselves in a
financial crisis, consider your options - budgeting, debt
consolidation, or bankruptcy. Which works best for you? It
depends on your level of self-discipline, how much debt you
have, and your future financial prospects. While eliminating
debt may seem next to impossible, your life does not have to go
from bad to worse.
Self-help may be the easiest, cheapest way to eliminate debt.
First, stop charging now. Incurring more debt will only compound
the problem. Make a list of all your credit card bills starting
with the smallest. Pay as much above the minimum payment as you
can afford on the card with the lowest balance. Continue until
this debt is paid in full, and then proceed to the next card.
Systematically paying off your credit cards one by one will
reduce your debts dramatically. The fastest way to eliminate
credit card debt is to put every penny you can towards paying
off your credit cards. Do not underestimate the effect an extra
five or ten dollars paid repeatedly over time can have on
eliminating debt.
You may be able to reduce the amount of your combined monthly
payments and lower the interest rate by obtaining a home equity
line of credit or a second mortgage. Think carefully before
taking this route. Your home becomes collateral with these
loans. If you make late payments or miss payments you could lose
your home. These types of loans may provide certain tax
advantages but the fees can really add up. The same goes for
debt consolidation. You eliminate or reduce interest rates and
the amount of your monthly payments, but the length of the
contract and the fees can be more than your original debt.
As a last resort, bankruptcy could be considered. A
bankruptcy remains on your credit report for 10 years, making it
difficult to obtain credit, get life insurance, or buy a home.
However, it can be a fresh start for those who cannot otherwise
satisfy their debts.
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