With so many Americans drowning in a sea of debt right now, it’s only to be expected that we are awash with articles by so called experts that offer advice on debt reduction.
What’s much more surprising though, is that nearly all of the advice that’s being offered is general and vague, and almost completely worthless.
How many times have you seen completely useless advice like, “destroy all your credit cards and then start paying them down”?
Your struggling to put gas in your car, pay a medical bill or your mortgage, and somebody says, “destroy your credit cards!”, and you think to yourself, “thanks for nothing!”.
Right now the average American has close to $10,000 of credit card debt, in addition to his or her other debts, and most of them would love to get free from all that debt, and they just want to know how to do it.
A Quick Overview
The following is just a summary of what needs to be done, after which we’ll go into the details.
The first thing I’d suggest would be to call all your lenders and ask them if they’ll lower their APR, and you’ll likely be pleasantly surprised at the responses.
A number of lenders will more than likely agree while others won’t, but at least you’ll be able to make out a list of your debts, and know which ones you need to eliminate first.
As soon as you know which creditors are charging the highest APR you’ll want to move the debt to a card or lender that charges less interest.
Then what you need to do, is to pay the maximum that you can every month on the card charging the highest amount of interest, and pay just the minimum on the others.
The Details
The reason that some lenders will refuse to negotiate with you is that that they won’t do a deal with people that have been delinquent for less than ninety days. So if you haven’t been delinquent for that long, then tell them that you’re in financial trouble and are trying to avoid becoming insolvent.
It may or may not work, but it’s certainly worth a try.
Assuming that you now have a list of creditors, and you know how much interest each company is charging you, I’d like you to put the list in order with the company charging the lowest interest at the top.
What you then have to do is to call the company at the top of the list and ask them if they’d be willing to assume the debt that’s owed to the company at the bottom of the list.
If they consent, then you must be sure to ask them if they’ll retain the present rate of interest, and if they won’t then make a note of how much the new interest rate will be, and continue on down the list.
Once you’ve called every company on the list you’ll be able to call the company or companies offering the best deals and arrange for your worst debts to be transferred to them.
You’ll then need to reorder your list so that the company that’s charging you the most is at the top; and that’s the one that you’ll want to get paid off first.
You must then pay the lender at the top of the list the maximum that you can every month, whilst paying the others only the minimum.
Once the lender at the top of the list has been paid off, you remove its name from the list, and then focus on the new top of the list lender.
It’s almost certain that you receive tempting offers from different credit card companies in the mail on a regular basis, and you most likely just toss them into the trash.
Don’t!
Instead, call them and ask how much debt they’re willing to assume, and how much interest they’ll charge, and depending on the deal that they offer, you can then incorporate them into your list.
One Last Thing
If you have funds in a savings account that’s earning you next to nothing, then consider withdrawing them, and using the money to pay off, or to pay down some of your expensive debts.
You might even consider cashing in an IRA or 401K if you have one; and if that sounds crazy then consider this.
If you owed $1000.00 on a credit card that had an APR of 14 percent, and you only made a minimum payment of 4 percent, then it would take you 6 years and 7 months to pay off. If however you were to pay off double the minimum amount every month, then it would only take you only one year and three months, and you’d save $269.00!
Hopefully this article will have given you not only some ways to reduce your debts but will have also given you the motivation to start doing it right away.
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