Digging yourself out of debt can prove to be a hard undertaking, especially when interest keeps piling up, and you have other financial obligations that you also must meet. Saxton Associates see it every day and see the same patterns. Their experience in debt consolidation has lent them plenty of insight into how to overcome debts from credit cards. It is possible to become debt-free if you consider the following tips from Saxton Associates.
1. Go For Lower Interest Rates
When you are shopping for a loan, consider those that offer low-interest transfers. It will help ensure that much of the payments you make go towards settling the principal. You might be eligible for 0% interest promotional rates. Keep in mind that the transfer of a balance faces a fee. For instance, you may be charged 2% of the amount transferred. However, settling the feed so that you get a lower interest rate could be worth the effort more so if repaying the balance in full will take some time. Do your homework and find out if you will save some money by doing this, which you can do using an online balance transfer calculator.
2. Exceed The Required Minimum On Your Credit Card
Paying the required minimum on credit cards can have you in debt for a good while. For example, if the credit card balance is £1,000 at an interest rate of 12% with a minimum of £35, you will be making payments for about 34 months. The amount of money you cough out will be around £1,184, meaning you will have paid £184 for the money you borrowed about three years ago.
However, if you increase the amount by £50 monthly, pay off the dues within 23 months at the cost of £121. Bump payment up to £100 per month, and you will pay off the balance within 11 months at an interest of £59.
3. Review Your Spending
If you can find ways of reducing your expenditure and redirecting more money towards paying off the debt, then you will settle your dues in a fraction of the projected time. But the perennial problem here is where to find that extra cash. Stumbling onto some money is rare, but some of the viable source for such unexpected cash including:
- Getting a sudden pay raise
- Reducing your spending
- Being awarded a bonus
Of the three possibilities mentioned above, the most likely place of finding some extra money is by finding some areas in your monthly spending where you can make some cutbacks. Review your expenditure by assessing your bank statements and cash management account while you also track your spending. The little you can spare will go a long way towards settling your debts.
For instance, you might be paying for a service that you rarely use. Conversely, you could have purchased a data bundle whose limit you never come close to or reach. Your truffle-and-champagne habit might be why your food bill shoots up. It would be best if you considered giving up some of these unnecessary luxuries to free up money that you can use in other essential areas, such as paying off debts.
4. Save For Emergencies And Unplanned Expenses
Your concerted efforts to get out of debt while you have nothing in your savings could have you running in place. You will have done your best and paid off your dues, but sooner than expected, the plumping springs a leak, you have a medical emergency, or the car develops an issue that you cannot overlook. Without access to some quick cash, credit cash will be the only other viable option.
To ensure you have something for those rainy days, consider viewing your savings fund as a bill. The same way you strive to honor your mortgage payments, rent, the retirement fund, and living expenses, do the same for your emergency savings. Do this until you have saved up an amount that equates roughly 3 – 6 months’ worth of your average monthly expenditure.
Review your budget to have the essential expenses under 50% of your income. And as contribute toward the emergency savings fund, also inject some money to your retirement kitty. You can then funnel what is left into paying any outstanding debts. Once you are out of debt, you can then focus more on fattening your saving and retirement funds.
5. Stifle Your Need To Spend
Getting out of debt will seem like an uphill endeavor if you keep have new expenditures that add to the balance. Consider walking around with your credit cards, leave them somewhere safe at home. However, doing this will be harder when it comes to shopping online. Many of the online retailers will save your payment information to use it to entice you to spend. Decline this option if there is one availed to you, or consider skipping some of the purchases.
If you know what you have accrued and what it costs, it might help you quit charging things on your credit card. Make a list of what you are owed, your monthly payments, the interest rates, then do the maths.
Once you know what you are owed, you can attack each debt, handling them one after the other. Start with those with the highest interest rates as you schedule payments for the loans and credit cards. Once you settled the debt with the highest interest rates, you then should focus on paying the much you can on the next.
Visit Fidelity.com to get more pointers on how you can pay off your debts as you save some money too.
6. Learn To Use Credit Wisely
Adhering to some of the rules for credit might help you learn how to ensure you make money-wise purchases. Do not charge more than what you can repay in a month. Moreover, ensure that you make timely payments. If you find that you have a balance that keeps following you or seems to balloon with every month, prioritize paying it off so that it does not prevent you from attaining financial freedom and achieving your goals, especially for your retirement plans. Speak to Saxton Associates to discuss debt consolidation.