Get Out of Debt and Stay There
Getting out of debt requires changing financial habits. Changing the
habits that got you in debt in the first place. The first thing to do is
quit paying only the minimum required each month. Paying the minimum is
exactly what the banks want you to do. The longer it takes you to repay
the charges, the more interest the banks make and the more money you spend
in the end. Don't play their game. Start paying as much as you can each
month. Examine your normal expenses and try to find the money. Increased
payments will save you hundreds, if not thousands of dollars in interest
payments. That.s a great way to get out of debt.
The next thing is to take a look at all your credit cards. Pay
particular attention to cards with the lowest interest rates. Consider
transferring the higher interest debts to those cards, as balances permit.
Another way to transfer higher interest debt to a lower-interest credit
card is to take advantage of those promotional offers used by many banks
use to entice consumers to their line of credit. It can be worth using the
come-ons if you can pay off the debt before the higher interest rate kicks
in. The money saved in interest can be applied toward the principal each
month, thus reducing the outstanding debt balance even further.
Some other ideas are to look at your savings. Unless you.re earning
more than the interest rates on your credit card, you could cash out your
savings and investments and use the proceeds toward debt repayment. It
just makes sense. If your life insurance has a cash value, then borrow
against the policy. The interest rate is usually well below commercial
rates, and you can take your time repaying the loan. Try hitting up family
and friends. See if they can help you get out of debt.
Another solution can be a home equity loan. The loan proceeds can be
used to pay down your credit card debt and since most homeowners itemize
on their income tax returns, the interest is usually tax deductible. If
you participate in a 401(k) qualified retirement plan, many plans have a
loan feature that allows you to borrow up to half of the account's value,
or $50,000, whichever is less. The interest rates are usually a point or
two above the prime interest rate, which is cheaper than that of credit
cards. This may be a good option for debt repayment and to get out of
debt. The best part is that you pay it back to yourself. The interest paid
on a 401(k) loan goes directly into the borrower's 401(k) account. That.s
a good deal.
