Posts Tagged ‘credit’

Living the American dream is becoming a nightmare for some. We are taught to believe that the American way is to develop credit as early as possible. As soon as we turn 18, credit card companies are inundating us with offers for credit cards specifically designed for students. We buy cars on credit, we buy houses on credit, and if we are fortunate enough to have a stable income and show good payment history, there are plenty of credit card companies that will extend you even more credit. As our credit report grows, companies then begin to extend offers of low or no interest balance transfers in order to get us locked in to their company. Of course, once you transfer the balance, there is more credit remaining for you to continue spending. Before you know it the minimum payments are more than you can handle and you find yourself seeking debt relief. Sound familiar? What do we do to stop the cycle of the debt snowball? Getting out of debt isn’t easy but there are many small steps that you can take to begin the process.The first order of business is to change the way you think about debt. Debt is like a tumor that grows in our life without our notice until it is so large that the situation is seemingly inescapable. Beginning to live within our income range can be a painful process. Look back at the last six months of your credit spending. Were these purchases necessary or simply convenient? I expect you will find spending that was unnecessary and, now as you look at them, frustrating. Now that you are aware of your credit spending, how many of them were true emergencies? I classify an emergency as an event that unless corrected will stop you from functioning in your normal life patterns. Lets use a car repair as an example. Car repairs are inevitable in the lives of most Americans. They are rarely planned for and most often cost more than we have available in uncommitted money. So where does the money come from? Credit cards, pull it out, swipe it, you are back on the road before you know it. That car repair is going to follow you much longer than you will probably own the car. Why? Because the majority of American’s are not willing or able to pay off their credit card balances at the end of the month. There is that tumor, growing and growing.I want to challenge you to change your way of looking at budgeting. Make it a goal to plan for emergencies. Start small if you have to. Plan to set aside an emergency fund. Even if it is only $500.00. Have a garage sale, sell everything that is unimportant, collecting dust, and make whatever sacrifices you have to make such as not going out to eat until you reach your goal. Whatever you have to do to get the money set aside in less than 30 days.

Rules for the emergency fund.

1. Keep the money in a separate account. 2. Only use the money for true emergencies.3. Plan to add to the fund until you have set aside at least one month living expenses, experts say three months.By meeting this challenge you are on your way to reducing debt. Small changes will grow to large ones before you realize it. The tumor will begin to shrink and you will become addicted to reducing your debt. It is like getting income from a second job without ever leaving your home! A Final Thought:There are many different theories and ideas floating around regarding topics such as: debt management, debt consolidation, credit card debt, getting out of debt, debt repayment programs, and bankruptcy just to name some that are commonly sought on the internet. My best advice is to seek the most reputable companies in the industry and ask many questions. If things do not sound right and feel even worse, they probably are what they seem. Then check with more companies. You will be providing a lot of personal information that if it fell into the wrong hands could lead to identity theft and more damaging attacks. Being educated and committing to making small changes are steps that once taken should be celebrated, tell everyone of the hard work you are doing and offer them insights as you learn. Being vocal regarding your new commitments will increase your efforts. Good luck!

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.

Q. Will I be totally debt free when I’m done? Our program is focused on dealing with only unsecured debts (credit cards, medical bills, unsecured personal loans). We cannot help you with debt that is secured by collateral (such as mortgages or auto loans). After completing the program, however, the money that you are no longer paying towards your unsecured creditors can now be used to pay down secured debts, as well as to save for your financial future.

Q. Will I have to take out another loan to cover my current debts? No. Our debt reduction program is not a new loan. Some of our clients will use a “consolidation” loan in conjunction with FDR’s debt negotiation program, but most fund their settlements with a monthly payment into their settlement savings account over the program period. That being said, we do have a relationship with a lending company, and some clients who demonstrate a consistent pattern of saving their monthly draft amount on time may be eligible for a loan to pay off one or more of their settlements. Of course, this is never something that is required of any FDR client.

Q. How is the service fee paid, are they paid upfront? Our fees are not charged upfront – instead they are withdrawn from your new settlement account each month. Typically our fees are spread out over a period spanning 18-19 months. The fee is broken into a Retainer fee, that is paid out over the first 3 or 4 months, and then a Service fee that is paid out over the following 15 months. All fees are included in the one monthly savings amount that our account executives will quote to you.

Q. Should I put all of my credit cards in the program? If you have one card with a low balance that you can quickly pay down to zero, then you may hold onto it for emergencies. However the program will generally not work unless you enroll all of your high balance (greater than $500) credit card accounts. As you can imagine, it makes it difficult for us to negotiate with your creditors if they can see that you are negotiating on some accounts but not others.

Q. Who controls the bank account where I am saving funds for creditors? You do. The bank account is set up in your name and the money in the account is your money. The reason why we recommend keeping it in a new account that is separate from your existing bank accounts, is that in our experience, this separation dramatically increases (by a factor of 2-3 times!) the probability that you will succeed in FDR’s program. FDR’s fees are deducted from this account each month, according to the Agreement that you sign with us. But the accumulated savings in the account are owned by you.

Q. How does this affect my credit? If you do not make required minimum payments to your creditor you may be breaking the terms of your agreement with them and your actions will probably be reported to consumer reporting agencies as a late, delinquent, charged-off or past due balance. This is true whether or not you have enrolled in a Debt Settlement Plan. Depending upon the condition of your credit report at the time of enrollment, a Debt Settlement Plan may have an adverse effect on your credit report and credit score. Our goal is to get you out of debt for the lowest cost, in the shortest period of time without declaring bankruptcy. Once you are out of debt, we will be able to refer you to a reputable credit repair organization if you desire. Please note, Freedom Debt Relief is not a credit repair organization.

Q. Will I receive phone calls from collectors? There are federal and state laws designed to protect you from creditor harassment. However, the fact is that most of our clients experience some collection calls. FDR’s goal is to get your creditors to call us and not you when they want to ask for money, and we will work with you minimize any calls that get through to you. In addition, we will work with you to make sure violators of collection laws, including the Fair Debt Collection Practices Act (FDCPA) are appropriately handled.

Q. Will I owe taxes on my forgiven debt? The IRS considers a forgiven debt as taxable income, so at the end of the year, they will expect taxes to be paid on the settlement. The IRS, however, has a form (Form 982) available for certain hardship situations that may exempt you from this tax. Please contact a tax advisor to discuss this issue further.

Q. Do interest and late fees accrue on my accounts? If you let your accounts go delinquent, your creditors will continue to add interest and late fees onto your balances. Typically, your balance will increase until a settlement is reached. Keep in mind that the interest is going to accrue regardless of whether you make minimum payments or not. FDR’s goal is to negotiate substantial reductions to the balances on your accounts, even after the interest and late fees have accrued.

Q. Could I negotiate on my own? Yes you can. You can also do your own taxes and repair your own car, but most people choose to seek help. Most people prefer to leave these tasks to experienced people who earn their livelihood as specialists in those lines of work. Our team of debt negotiation specialists has only one job – negotiating reductions on our clients’ unsecured debts, each and every day of the week. Our knowledge and experience puts us in the best position to stand up to your creditors and fight for the best settlement possible. Together, FDR’s team of negotiation specialists are resolving approximately $10,000,000 of debt each month (and growing!).

Q. Do you begin negotiating with my creditors right away? Except when dealing with certain difficult creditors, we generally contact your creditors right away (typically within approximately 1-2 weeks of your joining our program) to let them know that we have Limited Power of Attorney and to request that future collection calls come to us and not you. The actual negotiation activity is typically very limited until you have saved up enough in your settlement account to make reasonable offers to your creditors. Most (but not all) creditors do not want to spend time negotiating an account unless they know there are funds available. The first settlement typically happens in month 6 to 9 of a client’s program (this varies greatly and depends on your monthly savings amount and the number of creditors you have enrolled in the program as well as the balance of each individual account). In some instances it may take more than 9 months before the first settlement is reached.

Q. Will my debts be sent to a law firm? Will this result in a lawsuit? Creditors do have the right to send debts to third party collection agencies and/or law firms in order to collect a debt. If this happens, we will continue to negotiate on your account and will treat the debt as a priority creditor (meaning we will try to resolve it first, before moving onto your other accounts). Based on our actual experience, it is a small percentage of cases on which lawsuits are actually filed. When this does happen, usually the purpose of the lawsuit is to force a settlement. We will continue to negotiate to settle the debt, although the settlement percentages are often higher than typical “non-legal” settlements. If a lawsuit is filed before you have saved up enough funds to negotiate a settlement, we will seek to resolve the account by putting it on a long term payment plan for 100% of the balance. Please note, we are not a law firm and cannot provide legal advice or legal representation.

Q. Do you guarantee that you settle all of my debts for a certain percentage? No. Every case is a negotiation, and there is no guarantee how the negotiations will wind up. Furthermore, the success of our negotiations is highly dependent on your ability to save a specified amount each and every month you are in the program.

Q. Will entering your program repair my credit? No. We are not a credit repair company, and our goal is not to repair your credit. Our goal is to negotiate settlements at less than face value on your unsecured debts.

Source: http://www.freedomdebtrelief.com/debtreduction.php

FDR’s Debt Reduction Program, also know as Debt Negotiation or Debt Settlement, is an aggressive approach to becoming debt free. It is appropriate for debtors with a serious amount of debt or who are considering credit counseling or bankruptcy. The program’s goal is to find the optimal solution to lower your debts, help you deal with your creditors, and get you on the road to financial freedom.

Debt Reduction Steps

The Debt Reduction Program is very effective. Here is a step-by-step overview:

Step 1: Call or e-mail us for a free consultation. We will assess your financial situation and determine your potential for debt reduction.

Step 2: We will work with you to determine the appropriate monthly dollar amount that you plan to save towards a negotiated settlement. This amount is typically significantly less than your current minimum payments, and goes toward paying off your debt (not simply paying credit card interest charges). These funds will be saved every month in a new account that you set up and control.

Step 3: Once you enroll in the “Debt Reduction Program” we contact your creditors in an attempt to handle future creditor communications. You are requested to avoid using credit while on the program.

Step 4: After funds have accrued to make reasonable offers, we begin negotiating with your creditors individually. Typically, we attempt to reduce debts by at least 50% of your current balances. We stay in contact with you to keep you apprised of your situation. Please note, it may take several months of savings before we are in a position to make settlement offers.

Step 5: Once a settlement is negotiated with a creditor, you will be notified via a “Good News” notification from us.

Step 6: After the account is paid, we request that your creditors report to the credit rating bureaus that your accounts are “settled in full,” “settled,” “paid,” or “settled for less than the full amount.” Either way, you no longer owe on this account and the balance is zero. Congratulations, you are now free of that debt!**

After the Program: If you are interested in credit repair, purchasing a home, purchasing an automobile, or related financial services products – we can help you find a company to apply for access to other products. Or, if you simply want to talk about a financial services decision, we will always help you think about your best strategy for staying debt free and building personal wealth.

* Actual results will vary based on individual situations and negotiations. Success in our program is highly dependent on your ability to save a specified amount consistently each month. Freedom Debt Relief may be unable to get you debt free within 36 months. Freedom Debt Relief makes no representation or guarantee that we will be able to lower your debts by a certain percentage. **Please note, Freedom Debt Relief is not a credit repair organization.

Debt Reduction Strategies
The best debt reduction strategies will take into account three primary goals: stopping new debt accumulation, reducing debt, and eventually eliminating debt altogether.
Ideally, this would be accomplished while also trying to minimize damage to your overall credit rating. However, even if your credit score is damaged, it isn’t impossible to restore it-you just need to follow a plan to pay off your debt and get back on track.
Being in debt is an increasingly growing problem. Creditors have made it too easy for consumers to get in over their heads. And, given the poor economy, many Americans are suffering under the stress of excessive debt compounded by high unemployment rates and other factors.
If you have too much debt, you’re not alone. Don’t despair or give up though, because there are plenty of things you can do to start to take control and create a plan to get out of debt.
Here are some of the best debt reduction strategies to follow:
Professional Debt Help
If you are in over your head, one of the best things you can do is to seek the help of a professional financial advisor for debt advice. There are debt management companies and credit counselors who will assess your situation, and recommend a plan and course of action that will get you back on the right track.
Many debt help companies will deal directly with your creditors for you, so you don’t have to deal with any more embarrassing phone calls from collectors.
Your entire debt can be completely eliminated within a few years, as long as you follow the repayment plan.
Reduce Debt
You need to start debt reduction strategies by finding every possible way to reduce your debt. First and foremost-stop adding to your debt in the first place. Don’t open new credit cards you don’t need, and close accounts as soon as you pay them down.
Transfer low balances to another card so that you can close more accounts. The less potential you have for accumulating new debt, the better off you will be.
Cut up all your credit cards, and call the banks to close the accounts. You will feel empowered just by taking this first step on the road to debt recovery.
Transfer Balances
Make sure you aren’t paying high interest rates when you don’t have to. Carefully check your credit card statements to make sure you are aware of the interest rate you’re paying.
Do a little research and find a low interest balance transfer offer. Then move all high balance cards to a lower interest rate card. This can save you a ton of money in the long run.
Be sure you cut up the credit cards and remember to close the accounts so you won’t be tempted to spend more on credit. Also, interest rates for bank loans, auto loans, and mortgages have dropped recently.
Consult with your bank, or do some research on-line to see if refinancing other loans won’t reduce your overall debt.
On a home loan, typically even a small drop of 1-2% in interest can result in hundreds of dollars of savings-and you can take that extra money each month and pay down the balances of remaining debt, like credit cards.
Pay as Much as you Can
While you may be living paycheck to paycheck, do try to pay more than the minimum balance due, if at all possible. Also, try to pay one extra mortgage payment each year, by paying your mortgage by half every two weeks, or just adding one/twelfth of the additional amount onto each monthly payment.
These simple debt reduction strategies can really add up.
Take a close look at your budget, and see if there isn’t something in your life that you are willing to cut back on a little bit, like premium cable TV channels, or newspaper and magazine subscriptions-then take that small amount of extra money and apply it to paying down your debt.
Remember, the best debt reduction strategies will stop increasing debt, pay down your current debt, and put you back on track to eliminate your debt completely.
You simply need to sit down and make a plan and budget, and you will see exactly what needs to be done to get out of debt once and for all.
If you are really in over your head, or you lack discipline, then seek professional debt help. You can get out of debt, so don’t lose hope!

If you have experienced a loss of job or an injury it is very easy to become over loaded in debt. This is something that happens to people everyday. They get hurt, get laid off, or go through a divorce and end up using credit cards to make up for the cash they don’t have and end up in debt that they find hard to get out of. Using credit cards like they were cash is not a wise solution and with the high interest rates they charge you will find it difficult to get them paid back. If you have found yourself in this situation then this article will give you some help on getting out, if you aren’t there yet, maybe it will prevent it from happening to you.
As I said above it is never a good idea to use credit cards to get through tough times or even as your own form of debt reduction. The high rates will just take you deeper into the abyss of debt and make it harder for you to get out. For most people that file bankruptcy or looking for help with debt consolidation it is credit card debt that caused the problem.
If you are in a program of debt reduction, self imposed or otherwise, you need to concentrate on figuring out ways to lower your cash outflow and the amount of bills you have to pay. Credit cards will do the exact opposite; they will increase your bills and make it even harder.
Here’s an example that we can look at: If a family has bills including their mortgage, insurance, car notes, and other miscellaneous expenses that adds up to over $2300 per month is there any possible way to reduce this? There are a number of ways that one could look into to accomplish this, one way is to look into a mortgage refinance that will help us refinance the home mortgage and bring the other bills into it for one low payment. One of the advantages of doing this is that the mortgage loans are typically lower interest and in many cases may be written off on taxes.
If you take the time to look around you will find loans that will give you cash back, loans that you can take out against the equity in your home, loans like the one above that will allow you to combine everything into one low payment, and many other options.
Just about any debt you owe can be rolled into one payment or at least combined and reduced but anything like utilities, cable, cell phone bills and the like will have to be paid separately. You may be surprised at how much you will be able to reduce your monthly payments with a debt consolidation loan.

We need to resort to quick debt reduction to make our life easier and happier. Here we will discuss debt elimination tips and the best way to eliminate credit card debt. Life may appear great with credit cards, but the bottom line is that mounting debts are a major cause of stress.

With a large number of credit cards in our wallet, we end up incurring a lot of non-essential expenditure. With little or no debt to pay, your savings will grow, coming in handy at times of need. Therefore, it is time we changed our spending habits and find out the best way to eliminate credit card debt for leading a happy life.

Credit card companies lure users into making unnecessary purchases by offering many benefits, because they stand to earn heavily on unpaid balances. People end up in debt traps because they tend to spend a lot on nonessential things. Things can go so bad that you end up paying most of your money on credit card debts. Lenders normally avoid lending to people with high credit card debt balances.

Adverse Affect on Credit History

You should be aiming at maintaining a good credit history. It will be helpful when you go for a home mortgage or car finance. Bad credit will get you a mortgage, but the terms of finance may not be as good. You may have to pay a higher interest rate and a bigger down payment upfront. It does lead to a substantial financial loss in the end.

The best way to eliminate credit card debt is not to incur a debt at all. This means that you should use your credit card judiciously and not consider credit card as free-money. The money you spend using your credit card has to be paid by you only. If you have already incurred heavy credit card debts, you can resort to debt elimination tips for reducing your debt burden.

Debt Elimination Tips

Here are some tips we would recommend to get you out of debt quickly:

- If you are having a tough time coping with your credit card debt, stop using the card further. Cut down your expenses, so that the money saved is used to pay off the debt.

- For quick debt reduction, pay more than the minimum payment. The minimum payment just about equals the finance charges. The more you pay, the quicker the debt is eliminated.

- Transfer all your credit card debts to a zero percent interest credit card. You not only save money on interest, but also have control on the entire debt. This way you can plan your debt elimination better.

The best way to reduce credit card debt is to incur no debt at all. However, if you have already built up credit card dues, you can use the debt elimination tips mentioned above to reduce debt and lead a stress free life.

Both credit counseling and debt reduction are common solutions used by consumers for debt relief. But, people tend to get confuse between these two services and find difficulty to decide which option to select. While there are many similarity between these two types of debt relief programs, there are some key differences that you may want to take into consideration when deciding which option to go for. Let explore the major differences between debt reduction and credit counseling.1. Credit AccountsMost credit counseling programs will require you to close all your credit accounts. Although there are a few exceptions that allow you to retain account for business needs, most often you need get your accounts closed if you choose the service. On the other hand, there is no such requirement to close all your credit accounts in a debt reduction program. You will still allow to remain all your credit accounts active. It will be much more convenient to have credit cards, especially the cards standby for emergencies uses. However, keeping your credit cards may put you in risk of creating more debts to be added into your existing balances. So, if you are a person who can’t control the use of credit card, then credit counseling program might be a better option for you.2. Duration Of Debt LiquidationCredit counseling program requires longer time to be completed than a debt reduction program. Generally, this program will take about 5 years to liquidate debt, whereas, a debt reduction program often allow consumers to retire their debts in less than 2 years, but there are people manage to do in less than a year .3. Total Debt PaymentNormally, the credit counseling companies will help their customers to negotiate a lower interest rate, making them pay less in interest. However, the principle of debt is remained, meanings that you will saving in total debt payment by paying less interest on credit counseling service. On the other hand, debt reduction program involves a negotiation to reduce the total debt amount, which can range from anywhere between 20% to 60%. In this program, you pay less in total debt which one of the advantage over credit counseling service.4. Credit ScoreIf you choose to enroll into a credit counseling program, your accounts will be re-aged to current status after you have made three payments. On the other hand, your credit score will suffer if you choose to follow a debt reduction program because your credit report will still stated as late payment while you are settling your debt. But, at the end of the program, the creditor will report that your account has been “settled in full” which is one of the agreements in a debt reduction contract.SummaryNow, you have a better idea on what are the differences between credit counseling and debt reduction program. You should consider them when deciding which option best fit your need for debt relief.

As the basic costs of living have continued to rise, more Americans are falling into debt. If you’re one of them, you may think there’s no hope for the future. But there is. A debt reduction plan is all you need to free yourself from debt for good. Follow these three steps to start reducing your debt.

Debt Reduction Step 1: Stop Creating Debt

Pay cash for regular expenses like groceries, gas, and utilities. Using a debit card is okay, as long as the money is in your checking account. Your goal is to avoid paying interest on your daily expenses and to avoid increasing the balance on your cards. Once you have a balance, every charge will carry interest, even if you pay that portion of the bill at the end of the month.

Before making a purchase, consider whether it’s a need or a want. For example, groceries, heat, and new shoes for your growing child are necessities. $200 designer sneakers for your trend-following teenager are not. Of course, you shouldn’t skip necessary car maintenance and medical appointments to save money. It’s usually cheaper to solve a problem in the early stages than to wait until it’s much worse.

Debt Reduction Step 2: Calculate Your Expenses and Debt

You don’t need fancy software to create a debt reduction plan. All you need is paper, a pencil, and a calculator. First, list all your monthly must-pay expenses: rent or mortgage, auto expenses, groceries, insurance, medical expenses, student loan payments, childcare, utilities, tuition, and minimum debt payments. Second, list all your sources of income and how much you receive on a monthly basis. Third, subtract your expenses from your income. The difference is how much you can put towards reducing debt. If your expenses are more than your income, see step three.

Now make a chart that lists the name, balance, interest rate, and minimum payment for each debt or loan.

With these three lists in hand, you can create your debt reduction plan. You have two options to quickly reduce debt: pay off the smallest balances first or pay off the highest rate debts first. The highest rate plan may save you a small amount over the smallest balance plan, but paying off a small balance quickly might be the motivation you need to keep going. The key to success is your commitment to paying as much as you can every month. If you can pay off any one balance in full right away, do it now.

If you pay the smallest balances first, pay only the minimums on your other debts. Once that debt is paid off, move onto the next one, but pay both the large payment and the minimum payment. This is called a debt snowball. By the time you reach the last debt, you’ll have worked up a large payment that will pay off your final debt quickly.

If you pay the highest rate debts first, pay as much as you can to the highest rate debt and the minimums on the rest. When that debt is paid off, apply those payments plus the minimum to the next highest-rate debt.

Many people with high interest rates apply for debt consolidation loans or balance transfers to 0% cards. Either option will significantly reduce your interest rate, allowing you put more of your payment toward the principal. Just make sure that you can either pay off the debt or transfer it again before the interest rate rises.

Debt Reduction Step 3: Change Your Spending Habits

People who permanently eliminate their debt also change the way they view money. Rather than going into debt trying to keep up with their friends and neighbors, they see money as a tool to help them achieve their own goals. Instead of acquiring stuff that impresses other people, worry about how you feel about yourself. Being debt free will make a lot happier than the biggest TV in the world would.

For more articles on Debt Reduction, visit: http://www.bills.com/debt-reduction/