How Can You Reduce Debt?

Now that is something anyone who has ever been in debt would like to know. How about making a list of all your essential payments, for a start? Mortgage payments are one – if you default, your home stands the risk of repossession. Next comes all secured loans – if you default, you lose your assets. Include loans similar to these in the order of importance, and make a plan to clear the highest priority ones.

Use Cash

Don’t use your credit card. Leave it at home. Since you have made a budget, you know how much money you need to carry in your wallet. When you are already in debt and only clear the minimum payment due on your credit card bill each month, you pay hefty rates of interest on the outstanding balance, right from the day you use your credit card. It is a good idea to hide your credit cards until you have cleared your outstanding payments. You won’t believe how effective this can be unless you actually practice it. All it takes is determination. Did you know that credit cards, though so convenient, charge daily compounded interests? What you want is to work towards debt relief, not add to your problems. Therefore, the moral of the story is – use cash to buy things you ‘need’, not ‘want’; this will save you the extra money you are forced to pay as interest charges as well as prevent you from those impulse buying sprees until you are debt free.

Follow that Budget

Earlier on, we talked about making a budget. Now break this down into shorter time frames, which means, make weekly budgets that you find reasonable to follow, bearing in mind that you are making the effort to reduce your credit card debts. On a daily basis, re-visit your budget at the end of the day. Are you sticking to the budget? Then ask yourself how much money you can spare to clear off some of your debts. It would be great if you can make a repayment that is in excess of what your creditor expects. But reality can be different, so try and set aside a specific amount towards clearing your debts and make sure you make the payments regularly. Gradually the debts will reduce and you can strike them off your list. As you strike each one off, allocate the money towards repaying other debts still on the list.

Don’t Waste Money On Interest

Creditors are ingenious in the options they give you. They tell you that you only have to make a minimum payment that seems very low each month. Do you know why? It is because their own income comes from charging you a high rate of interest on the balance money you owe them! On the other hand, you end up spending a sizeable amount of money paying interest charges while the actual debt is just sitting there, due. Don’t use the part payment option. Either clear off the entire bill or increase your monthly repayments so that you avoid losing money on interest charges.

While in the process of budgeting, you can also set aside money towards credit cards charging a high interest rate. This is a good way towards debt relief. Discuss this with your creditor.

Timely payments

Try to clear off your bills as soon as you receive them rather than wait for the date on which they are due and incurring late fee. You don’t gain anything by delaying your payment. For those with a good credit rating, it is possible to make a balance transfer of your outstanding balance to a card that comes at a low rate of interest. But here too, stick to your commitment of clearing off your bills within the time frame provided, or you defeat the entire purpose.