If you’re struggling to pay your bills, you need to take urgent action to correct this. Paying down debt cannot be achieved overnight, but you can pay off your credit card debt and loans far more quickly. The longer personal debt is allowed to continue, the more interest will accrue. Lenders like nothing more than a customer who chooses the maximum lending term, makes the minimum payment on his card or pays slightly outside of the grace period.
Paying Down Debt on Credit Cards and Loans with Better Budgeting
Your first plan of action for getting out of credit card debt should be put together a budget, clearly documenting all forms of income and expenditure. This allows you to visibly see where your money is going so that you can identify areas where you can start to realize savings. You may also wish to consider ways to make some extra income if there is no overtime available where you work.
Priority debts, such as your utility bills and mortgages payments, can be reduced. See if you can refinance your mortgage, find a cheaper house to rent and check to see if your gas and electricity can be purchased more affordably by using a price comparison site. The great thing about trawling the market for a better deal is that it now requires minimal effort, but can yield hundreds of dollars in potential savings
Non-priority debts, such as credit cards, unsecured loans and bank overdrafts, can be reduced with a debt free solution or debt consolidation loan. Paying down debt can be achieved by reducing the cost of alcohol, cigarettes, gasoline and groceries by cutting back or switching to generic brands.
It is now possible to use the money you’ve saved to pay down debt gradually over time. You’ll owe less which means that a lower percentage of your disposable income will go towards servicing debt interest. If budgeting alone isn’t sufficient, a debt relief program could provide the answer.
Using a Debt Free Solution to Pay Off Your Credit Card Debt More Affordability
If you’ve explored every option and budgeting hasn’t helped you to save sufficient money, you may wish to proceed with a debt free plan. Rather than reducing your debt at the rate specified in the credit agreement, you can reorganize your debts and make a payment that is affordable to you instead.
Unlike better budgeting and debt consolidation, a debt solution may result in a lower credit score. This is because it involves defaulting on the terms and conditions of the credit agreement. If you’ve already defaulted, you probably have little to lose. Eliminating debt could be beneficial as up to 25% of your FICO score consists of the amount of money that you owe to different types of creditors.
Debt Management Plan for Paying Down Debt
A debt management plan not only improves affordability, it allows you make a single payment towards clearing multiple smaller debts. In order for it to be accepted, it must be agreed to by all creditors. You can pay off your credit card debt by sending a reduced payment to an intermediary. They deduct their 15% management fee and distribute the remainder to creditors.
Debt Settlement Program for Getting Out of Credit Card Debt
Getting out of debt with a debt settlement program involves a negotiation process aimed at reducing the principal by up to 50%. You can then pay off your credit card debt by repaying the balance over a period of up to 36 months. It’s important to appreciate that debt cancellation is treated as a source of income and may be taxable by the IRS. Seek advice from a tax expert before paying down debt with this solution.