Is your debt load out of Control? Reducing your debt can feel like a difficult, hopeless task. Make no mistake, reducing and controlling your debt requires knowledge, self-control, discipline, and could take months if not years to accomplish. On a more positive note, it is a great feeling to be in control of your finances instead of them controlling you. This article will uncover 5 tips that you can implement right away to start effectively managing and reducing your debt.
- Analyze Your Borrowings
We are actually experts in accumulating debts of various types. We borrow to build a house, purchase a car, pay medical bills and educational expenses of children, and pay utility bills every month. We also make regular payments for amounts that we draw on credit cards or for purchased made through them. You would definitely have one or more of these types of debts at any point of time. Hence, it is necessary to analyze the type of debts that you have accumulated and the interest rates on each one of them to manage your finances properly.
The easiest way for reducing your debt fast is to apply for a consolidation loan, line of credit, or a home equity loan. Each of these options is great because monies are available usually at a lower rate of interest and you only make payments to one lender. You may be required to give up your credit card/s to the financial institution; however it is still worthwhile as your savings in interest can be huge.
- Eliminate Debt with High Interest Rates
The first question that you should ask yourself is about the rate of interest that you are paying on your debts after tax. There are basically two categories of debts. They are high interest rate borrowings and low rate borrowings. The credit card payments originate from cash that you withdraw for emergencies or from the purchases that you have made on the credit card. They actually carry very high interest rates. In fact, you could even call them deadly debt traps that could easily suck you in and kill you. Your first step should be to reduce the dues on credit cards gradually until you eliminate them completely.
- Manage Debt with Lower Interest Rates Diligently
The debts that you take to build a house, purchase a vehicle, make payments for education of children, and pay for utility bills, insurance premiums, and medical bills usually carry lower interest rates. Even your withdrawals from pension funds would have low rates. Further, the repayment periods for most of these debts are long term and you could afford to pay them from your monthly income. Still, it is advisable to save at least a few hundred dollars every month and try to clear your debt also as early as possible. When you have reduced the debt burden considerably and brought it to manageable levels, you would have peace of mind and financial stability.
- Control Credit Card Spending
Are you still using your credit cards? If you are concerned about reducing your debt, you need to exercise restraint when using credit cards? If your debt load is the result of overspending and using credit cards then make your credit cards a more in-accessible. By that I mean keep your credit cards in a safe place at home. Try to avoid impulse buys that you may regret later.