Something that may help you with debt reduction, is to talk to a debt reduction counselor, sometimes called a credit counselor. Often, there will be no fee for this debt reduction service, or the fee will be minimal. The debt reduction counselor can help you work out a debt payment plan that will assist you in paying off your debts as quickly and as cost-effectively as possible, and even help you create a budget for effective spending in the future.
If you’re the do-it-yourself type, debt reduction is still possible on your own. Create a realistic spending budget and stick to it. Use any leftover money to pay extra on your bill with the highest interest rate. When that bill is paid off, put the money towards the next highest bill. This will make the debt reduction process as speedy as possible.
Get rid of your extra credit cards. Debt reduction is not taking place if you continue to incur more debts to replace the ones you are paying off. Although emergencies may arise when you need a credit card, one is sufficient. Choose the card with the lowest interest rate to keep, better yet, stick to a debit card so you run no risk of stacking up more interest. A debit card will take money directly out of your checking account.
Look into debt consolidation options. Consolidating your debts will make them more convenient to pay off, and also may improve your credit. One way to consolidate your high interest rate debts is through home equity loans. You can use the equity you have built up in your home to take out a low-interest rate debt (rates get as low as under 4%) and you can use that money for debt reduction of high interest rated debt, credit cards, car loans, etc. Now instead of making five credit card payments and a car loan payment each month, all you have is a home equity loan payment. Your debt reduction may be considerable, since the average credit card has an interest rate of 14.4%. A warning note: Don’t take out a home equity loan if you might not be able to meet the payments, remember, you may lose your home if you default on the payments, and debt reduction is not worth losing your home.
Many people are tempted to consider bankruptcy as a means of debt reduction. Think again. Unless you have no alternative, bankruptcy will hurt you more than it will help. It will damage your credit severely, affecting you for the rest of your life. It actually stays on your credit profile for ten years, and even after that, it is very easy for creditors to find out if you have had a bankruptcy in your past. This will mean you will get higher interest rates on everything, mortgages, car loans, home equity loans, credit cards. And a little bit of extra interest may cost you a lot in the long run. Look into all your other debt reduction options before even considering bankruptcy.
Debt reduction can save you a lot of money and stress. If you decide to take care of debt reduction yourself, curb your spending and follow the repayment plan mentioned earlier. If you believe you will need help with your debt reduction, don’t hesitate to contact a debt reduction counselor from a non-profit organization.