DIY- Do It Yourself Strategies to Reduce, Eliminate Debt
We get into debt for many reasons, loss of job, unexpected emergencies
(including medical expenses), spending more than we can afford just to name a
If your situation is due to unchecked spending then your first credit card debt solution should be to stop spending on things you don't need.
One way to way to reduce debt is to stop using credit cards and learn how to pay them off and learn to budget your money.
A fast solution to reduce debt: contact the credit card companies.
Try to negotiate a lower interest rate and or lower payment. More than 75% of those who ask for a lower rate get it.
One reason is because of increased competition among the credit card companies. Lowering your interest rate could save
thousands. Creditors may also be willing to waive late charges and other fees, because they realize that it's better to
receive some of the money owed than none of it.
If possible, transfer balance from cards with the highest rate to cards with a lower rate. While transferring a
high credit card balance to a card with lower rates can be a good move, it's becoming more and more expensive.
Experts say that credit card companies are getting rid of the $75 fee caps on balance transfer and are increasing balance
transfer fees. For example, if you're transferring $10,000 to a card with a lower interest rate, and that fee is 3 percent,
that transfer will cost you $300.
If you do transfer balances more than once, then according the credit reporting
agency, you should contact the creditor and ask them to mark the account "closed at
customer request" otherwise your
credit report information will look like
the creditor closed the account.
Look at your credit card agreement to see if you have been charged with high balance
Check for references to a minimum fee for a balance transfer, but there's no reference to a maximum balance transfer fee, chances
are, there are no limits to how much money you may be on charged,
say the experts. Also the lower introductory rate usually only lasts for
a few months.
Transferring balances to often can affect your credit
score, as you become a bad credit risk. If you do transfer balances more
than once, then according the credit reporting agency, you should contact the
creditor and ask them to mark the account "closed at customer request"
otherwise your credit report will look like the creditor closed the account.
If you have multiple credit cards, pay the minimum amount
due on the card with the lowest rate and pay more than the minimum amount of the card with higher rate. When you have paid off the higher interest
rate card concentrate on the card with the next highest rate. This is only one
method. There are other systematic ways to pay down and
*One note about closing your account, experts say that closing your account could hurt your credit score.
Part of your credit score (15%) is based on the length of your credit history. By closing older credit card accounts, you
are in effect shortening your credit history and that could impact your credit score. One alternative to avoid using the card
is to take it out of your wallet or purse and store it some place that is secure and hard to get to.
Also you could increase you credit utilization by closing 0 balance cards.
Higher credit utilization can lower your credit score. For more on credit scores
credit score credit report page on this site.
Contact the credit card company and ask if they have a hardship program
to put you on, or as was stated earlier renegotiate with your creditors. If you are really in
over your head with no money, can't make the monthly payments, no 401k no
savings, then let them know if something isn't done you'll have to file for
Some credit card companies allow you to make several monthly
payments online. This may be one way to
reduce the effects of compounding interest and to get the balance paid down faster
Ask for a new and lower payment schedule, and lower interest
rates. With the threat of bankruptcy looming, they will usually do what
they can to avoid a total loss.
Take classes to learn
if you don't know how to budget. To eliminate debt, curtail extra spending, be frugal and apply the saved money towards paying off the debt.
down debt by finding additional income or cash
Go to school online - learn a new skill or trade from home and get a better paying job
One person's junk is another's treasure. See if you have some
unused items laying around your house or garage that you could sell.
Today it's much easier to sell stuff via online auction sites.
Check your life insurance policy, you may be able to borrow from the life insurance policy and use that money to pay down the debt.
You don't have to repay this loan, but your life insurance benefits will be reduced by the amount you borrow in addition to any
interest that has accrued.
Borrow from your 401K. Most plans allow you to borrow up to 50% of the
value of the fund, or $50,000, which ever is smaller. Interest rates are usually
1 - 2 percentage points below prime which is much cheaper than what you are
paying on your credit card. Not only is the interest rate lower, but you also
pay the interest to YOURSELF, a great benefit. That's right the interest you pay
on the loan will be paid directly into your account. *If you choose this option,
just beware that you are borrowing from your future and may not be your best
Consider a second part-time job until you have reduced your debt. This solution takes up more of your time so make sure that the
benefits make it worthwhile.
Borrow from family or friends. This can help you avoid high interest costs but it could also damage your personal
relationships if you don't repay
Work overtime or ask for additional projects.
Start a business based on your skills or knowledge. Teach a class, or become a tutor. If you are
volunteering, see if you can be paid instead.
Rent out a room in your home.
your DIY debt options:
establish a budget
pay down the highest rate cards first
consider transferring high rate balances to cards with lower rates
find additional income if possible or sources of funds
___Set aside 30 minutes this week - find ways to spend less and save more.
___Create a budget, or update the one you have.
___Make a list of purchases you can eliminate each month and apply the savings to paying off the debt.
There are many free printable calendar websites that allow you to print
blank calendars. Get one so you can keep track of dates and goals.
___Make a list of high interest balances then find a low rate account to transfer to.
___Track your expenses.
Click here for more information on debt free living, debt elimination and
free household budget .
Other ways to reduce debt or eliminate debt:
The idea of taking on a second job is not always a popular choice
so a quick debt solution is
debt consolidation where your multiple debts are consolidated into a
single amount and you'll end up with a single monthly payment. Banks, credit unions and other financial institutions offer debt consolidation loans. Again,
use the money to pay off all your credit cards, close them all down, and focus on putting every cent you can into paying off the personal loan.
Consider credit counseling.
You can find help with a credit counselor over the phone or in person. Certified counselors look over all your finances and help you come up with a plan to
handle your debt and living expenses. They may recommend simply following a budget or using a particular service, such as debt management.
You can reduce your total debt through
debt settlement. There are many services that will assist you
but beware and deal with quality companies.
If you own your home and have lived there for some time, you most likely
have some home equity available. In that case you could apply for a
home equity loan or
personal line of credit against your house. The interest rate on equity loans is generally
less than that of credit cards. Also, the interest on home equity loans may be tax deductible. Once the loan has been approved, use the money to pay off all
your credit cards. Just beware that there are financing costs involved. If you don't make timely payments on the new loan, you could lose your house.
Cash out refinance.
Requires that you refinance your house. Compare the interest rate on your mortgage to the current rate. If it is lower, then this may be an option.
a very last resort. The laws have changed and it is much harder to file for bankruptcy. A well planned debt solution is the best way to tackle your problem debt before
it gets worse and leads to filing bankruptcy.
There are many reasons why people fall into debt. Other than being reckless
or careless, the reasons are job changes resulting from income fluctuations, personal reasons, illness of a family member and other such incidences.
A good debt solution plan will help to recover from credit card debt.