There are times it may seem that you are drowning in credit card debt and you will feel that you will never be able to survive. Have no fear! There are several fast methods that can assist you in cutting your credit card debt regardless of the fact that you may think you do not have extra funds to put out.
Paying a Sum Greater Than the Minimum Required
Have you ever taken a close look at how a minimum payment is divided and how much of it actually goes to the debt? If you have a credit car
d with a balance on the card of $1500 and paid the monthly minimum payment required then only $7 will be attributed to the actual amount owed. The remainder goes towards the interest owed and is directed to the credit card company for the so-called Privilege of being a card carrier. By paying the minimum every month it would therefore take 17 years to pay of this debt. Paying a sum as small as $50 more per month reduces the payment time to just over a 2 year period. Can you see the large difference?
Moving to Lower Interest Card Options
This is a very simple option and requires no thinking. Why should I pay 18% interest per year when I can get a card with interest as much as half the amount? When you are a credit card holder that pays your debt every month on time then your interest rate should be lowered every year. You need to request time from the credit card issuer. If they refuse then look around for a card with a better rate and let them know that you are doing this. Once they realize that you are serious they will likely lower their rates and if not there are many options on the market today and you will find cards with lower interest rates.
Cashing out Your Savings
Another option is the use of your savings to settle the debt. Rather than the payment of interest of 18% per annum or more use your savings to cut your credit card debt. The fact is even if you are earning 11% interest on your savings you are still paying out more than this by paying 18% interest on your debt. You will in fact save in the long run by paying off the credit card debt.
Borrow From Life Insurance
Borrowing from the cash value of your life insurance policy is an excellent option. The risk involved in this is that you must ensure that the debt is paid before you die or the amount is deducted from the face value of the policy and leaves your family with less than they need.
Home Equity Loan
The utilization of the equity in your home to pay debts can be a double fold win. The two benefits are the paying off of the credit card debt and the next is that the interest from the loan is deducted on your income tax return. Make sure that you learn your lesson however and do not run up those credit card debts again leaving yourself with both the equity loan bill and credit card bills anew.
Borrow Using Your 401k
It is possible to borrow with your 401k as collateral. All the interest paid goes to your account so you are paying yourself more than you owe. The catch is that the loan is due in a time period of 5 years and if you leave your company before this the loan is due in its entirety at this point. If payment is not done at this time then it is taxed as a withdrawal and once you are under the age of 59½ then you pay 10% more on the amount. In addition to this, the money paid back into your 401k is taxed already and will be taxed again at retirement when you withdraw it.
Renegotiate New Terms with Creditors
When you are behind on your bills or going to be behind then the renegotiation of the terms of the debt is useful. Creditors will want you to repay your debt and many will realize that you are unable to do this without renegotiation of the terms of the agreement. They are often willing to listen especially where the term bankruptcy is involved.
Borrowing From Friends or Family
This is the last resort for most individuals but most friends and family will want to assist when they are able to. Make sure to repay them however as you do not want to spoil the relationship.
Comments