Christmas and holiday spending can be brutal on any family budget, considering most families significantly overspend during the holiday season. It is estimated that the average American household has more than $8,000 in credit card debt. After all the fun and festivities are over, you need to take control of your household budget and expenses. Unfortunately, one of the largest yet most controllable expenses for most individuals or households is their revolving debt. The payments may not only limit your spending power, but also limit your financial options for buying a car or home. To escape the credit card debt trap, you’ll need to determine the best way to pay off and eliminate your debt. The following is a list of suggestions on how to pay off your debt and improve your financial situation.
• Collect Your Information – Collect your latest pay stub and all recent credit card statements. Write down the name of the creditor, the balance, the interest rate, the expiration date and the minimum payment for each card. Then add up all the minimum payments on each account. Based on your disposable income after paying your mortgage, utilities, and other necessities; Do you have enough money left over each month to make the minimum credit card payments? Also, write down how much interest you are paying monthly and annually. This is the amount of money that is being wasted.
• Make a plan: Once you have a basic budget that includes your income and debt, you can decide whether you want to consolidate your debt, start reducing your debt by paying off the cards with the highest interest rates first, or start paying off the cards with the highest interest rates first. the lowest balances. Choose a plan you can stick with, no one knows your financial situation better than you.
• Consolidate your debt – Convert your revolving debt into a term loan. If you close your credit cards after you consolidate them, you will no longer be able to add to your debt. Plus, part of your payments will reduce the principal balance of your debt, unlike credit card minimum payments that typically only pay interest on the outstanding balance. Therefore, you will pay off your debt and the consolidation loan must be paid off within a certain number of years. If you have the financial capacity, it would benefit you to make more than the minimum payment, thus reducing the principal balance of the debt more quickly. If you decide to consolidate your credit card debt, take the time to thoroughly compare your options and look for an interest rate that is lower than your credit card interest rates. Also, set up an automatic payment arrangement for your consolidation loan. This will prevent you from falling behind and possibly facing penalties and/or a higher interest rate.
• Debt Settlement – This is the program that is an alternative to bankruptcy. When reviewing your finances, if you find that your monthly payments exceed your financial capacity, you should look into alternative options, such as: working with a financial institution to build your credit, discussing your options with a bankruptcy attorney, or speaking directly with bankruptcy companies. credit cards to reduce principal balances due on your debt.
• Stop charging: Once you make your plan to pay off your debt, you’ll need to commit to stop charging your credit cards and creating new debt until your finances are under control. Your plan won’t work unless you cut your expenses.
Taking control of your finances can create short-term hardships and limit your ability to purchase items for years to come, such as: a new car, a new home, or a vacation. However, it is imperative that you control your spending so that you can improve your finances and get out of debt. Once your debt is paid off, you’ll have a significant increase in disposable income. Also, you must have higher credit scores and a lower debt-to-income ratio; therefore, in the future, you should qualify for preferential rates on auto and home loans.
