Debt Relief Tips – 5 Tips For Paying Off Debt Quickly
Paying off debt is often the most difficult part of financial management. It’s not only a time-consuming chore, it’s also expensive. Most people don’t realize how much debt they have until they’re actually facing the mountain of debt and have no option but to start paying less. Here are some tips for successfully paying off debt without having to file for bankruptcy.
First, get copies of your credit report and the scores of your credit cards. If you know what the numbers are, this will keep you from being taken advantage of because creditors will use this information to justify charging you more money than you’ve agreed to. If you don’t have the time to do this yourself, find a good debt expert to help you work your way through your debt. Even if you know what your debt totals are, you may still want to consult an expert to see what your best options are.
Once you know what you owe, you need to consider your options. Paying off debt is a priority, and one of those priorities should be reducing your interest rate. The lower your interest rate, the lower your monthly payments will be. If you have the funds to pay off the lowest interest debts first (the debt avalanche method), try paying the smallest debts initially (the debt snowball method) to keep you focused on paying your debt off fast. While you’re at it, look into establishing a budget so you’ll know exactly what you’re spending your money on each month.
Second, start saving up. You never know when you’ll need more funds to pay off debt. One of the best ways to get additional savings when paying off debt is to save for a rainy day. Many people only think about money when they’re facing a financial emergency, but saving up for a rainy day is a wise financial move in any case. You can set aside money each month that you know you’ll be using to payoff debt; you just won’t have it sitting there earning no interest.
Third, cut up your credit cards. If you really want to take control of your finances and start paying off debt, you’re going to have to stop using your credit cards. If you’ve been carrying multiple balances on one or more cards, the total amount owed can quickly add up to a lot of money. If you’re finding yourself paying off credit cards every month, it’s time to break the habit. Instead, focus on paying off one credit card at a time and then move on to the next. You’ll be amazed at how much better your credit score will become by not needing to use your credit cards.
Fourth, get rid of all your debt. Sometimes this means actually liquidating your assets so you can settle everything at once. Of course, if you’re in a good position and the amount of debt doesn’t negatively affect your credit report, this may be the best option for you. For those with poor credit, liquidation may not be the answer because selling your assets might not get you out of debt. A better solution would be to get a settlement with creditors and settle your balances at that time. Once you’ve settled everything, go back to doing what you’d normally be doing (making monthly payments) and try to improve your credit report while you’re paying off your debt.
Fifth, keep paying the full amount of your bills. Most people are so focused on paying off the debt that they sometimes forget that they still owe the balance on their mortgage, car loan, credit cards, etc. If you need to, have an assistant pay your bills for you so you don’t forget. However, remember that the longer you take to settle your bills, the more likely creditors will realize that you’re not paying the full amount each month and they might be willing to negotiate with you.
Finally, work on improving your credit history. Any good investor knows that improving your credit history is one of the best ways to raise your score. Paying off debt is one way to improve your credit history, but is only one aspect of it. You’ll also need to make sure your payment history with other creditors is above average, and work on building up your savings. Finally, don’t close old lines of credit even if they have been inactive for a while.