How to get out of credit card debt – and why you must!
Borrowing money on a credit card for anything more than a very short time is one of the most expensive mistakes you can make.
Millions of us do, of course, because it’s so easy to borrow this way – buy something today and think about how you’ll pay it off another day.
Financially speaking, though, this is super-dumb.
Quite simply, you’re paying through the nose to borrow money this way.
That’s the reason you need to get out of credit card debt, and the reason is the easy bit.
How, then, do you actually do it?
You won’t get far until you decide you’ve fed the fat profits of credit card providers for too long and you’ve had enough.
You need to be determined and you need to keep that determination going.
Make it a priority
There’s no way round it, if you intend to clear debts as fast as possible and you (presumably you can't do it outright, or you wouldn’t have got into debt in the first place), it’s going to have to be a priority in your life.
That means making some financial sacrifices.
But these will pay off later.
Pick your targets
The whole point about debt is that it can easily overwhelm people.
They see this huge figure in front of them and can’t imagine making inroads on it.
The answer is to pick one target – or one card – at a time. Throw all the cash you have at that one card and aim to get it to zero whatever it takes. Choose the one with the lowest balance, that way you’ll have a quicker victory, which is important psychologically.
Or you could choose the card with the highest interest rate and focus all your resources on that. But pick a target and keep hitting it with payments.
Do a deal
If your debts are really out of control and paying them off appears to be impossible, you may want to accept this and approach those you are in debt to and do a deal.
Creditors are required to do all they can to reasonably assist people who have got into debt.
You may be able to establish better payment terms, over a longer period or even have a loan holiday where you pay 0% for a while.
Look at moving your total balance to a card with a lower interest rate, a 0% time-limited deal, if possible.
This in itself won’t reduce the principle, but it will mean the interest you’re paying won’t mount up so fast.
Be careful, however, that the new card isn’t offering a lower rate only for a limited period.
Unless you clear your debts in that time, you could end up paying a punitive rate all over again.
Sounds obvious, but many people need to be reminded of it.
If you you’ve transferred your balance to a lower rate card, don’t use that card to run up more debt.
Keep your spending in check.
Be disciplined, look for savings you can make everywhere you can and use them to get rid of credit card debt.
If your credit rating is good enough you may find a personal loan will be an attractive way of clearing your credit cards in one fell swoop.
Of course, you’ll still owe the money, but it will perhaps be more manageable as you’ll be forced to pay a set amount each month to pay off your loan and, most importantly, the loan should be at a far lower interest rate than changed by credit cards.
But be wary – make sure you fully understand the terms and conditions of any loan and exactly what repayments are involved, including any hidden fees or charges.
Make sure it’s cheaper than what you’re being charged by the credit card companies.
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