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Do you have credit card debt? Are you looking for a way to pay it off quickly? If you have consumer debt, you are not alone. Statistics state that half of all US households carry credit card debt with an average amount that exceeds $15,000. If you are looking for a way to pay off consumer debt, following these seven step will get you on your way to being debt free.
1. Find Out Where You Stand
As debt begins to mount, it becomes easy to stuff unopened bills in a drawer hoping they will some take car of themselves, but unfortunately that will not happen. Before you can get out of debt, you must know where you stand. This means you will need to get the bills out of the drawer, open them and make a list.
2. List Your Debt
Make a list of your debt that contains the total amount of what you owe, how much your minimum payment is and when the payment is due. You can use a spreadsheet, a printable budget tracker, an online tracker or piece of paper will work for that matter.
3. No New Debt
Now you know what you owe. It is time make a promise not to incur any more debt while you are trying to pay off your consumer debt. The goal is to reduce your debt as quickly as possible. That will not happen if you keep using your credit cards. If cutting them up is the only we that you avoid using them, DO IT!
4. Negotiate Lower Interest Rates
The first thing you will want to do is to try to negotiate lower interest rates. Most credit card interest rates are at least 14% with many of them as much as 30%. You read the horror stories on the back of your credit card statements about how long it will take you to have your account paid in full if you make only the minimum payment each month.
Call your credit card companies one at a time and ask them to lower your interest rate. There is nothing wrong with letting them know that if you do not get a lower rate you will be forced to file bankruptcy. The difference between paying 12% and 25% on $1000 in debt with a repayment amount of $50 each month is $121 in interest with a 23 month repayment period compared to $307 in interested and 27 month repayment period. Getting your interest rates reduced will save you money. A debt management company can help you get lower interest rates and setup a repayment plan.
5. Create a Repayment Plan
What this amounts to is selecting an order for repaying your credit cards. Some people suggest focusing on the card with the highest interest rate first. Others say you should pay off the card with the smallest balance first. Paying of the highest interest card first will cost you the least in the long run. Some people find crossing items off a to-do list motivating. That is why paying the lowest card off first is sometimes suggested. Pick the repayment order that works best for you.
Pay minimum payments on all cards except the one you have chosen to focus on. Pay as much as your budget will allow on that card. Follow this process each month until the focus account has been repaid. Pick the next card that will be your focus card and repeat the process. Each time you pay a card off, you will choose a new focus card. You should be snowballing payments as you go through this process.
6. Reducing Your Spending
Look at where your money is going and figure out how you can cut back on your spending. Every bit that you can eliminate from your spending is that much more that can go towards paying off your debt. Challenge yourself to cut unnecessary spending by a certain percentage or dollar amount. You will be surprised where you can cut expenses if really try.
7. Find or Make Extra Money
Start by looking at what you have in your home that you can sell. You can take a picture of a household item and have them for sale online in a matter of minutes with sites like Ebay, Facebook and Let Go. You don’t have sell all your worldly processions, but if you have items that have never been taken out of the boxes…this could be sign that is time to downsize.
If you don’t have things to sell, start thinking about what you can do that will bring in extra money. Take a part-time job. Start a business that does not require a large start-up fee. Can you write? Can you tutor? Look at the skill you have and figure out how to use them to make money.
Take any extra money that may come your way (income tax return, bonus, gift money) and put it towards paying off your debt. Develop a healthy obsession for becoming debt free. Cutting your spending and increasing your income are the keys to paying off your debt quickly.