Credit card debt is one of the major financial concerns of individuals. As the debt on these cards may be difficult to control, the interest rates, which range between 10-30% can be crippling for some. Many people settle with paying the minimum limit each month without realising this may take a small original debt and add thousands in interest and fees.
There are various ways to manage credit card debt and ultimately eliminate it from your life. Before trying the options below, a good practice would be to create a list of all your debts along with your goals in relation to this debt. This will give you a clear view of what you owe and assist you in making a decision on how to eliminate it.
- Increase Payments By 10%
If you are able to increase the monthly payment above the minimum, it will help reduce the principal amount and decrease the interest gained. Paying on the principal will not only reduce the amount of interest paid over the loan term, it will also decrease the length of the loan. For example, a loan for $100,000 over 30 years has a monthly repayment of about $600. If you were to increase the payment to $660 a month, which is just a 10% increase, then you would save in interest $18,000 and about 4.5 years.
- Prioritise Credit Cards By Interest
As the interest rates are the biggest problem among credit card holders, eliminating the highest rates will assist in making the debt more manageable. This process may take some time, but starting with the highest card and focusing on paying more every month will assist in reducing the debt and avoiding paying more due to the interest. As you clear the debt of one card, begin focusing on the next card until you have completely eliminated the debt as a whole.
- Debt Consolidation
A very easy way to reduce the number of payments and the interest rate is to consolidate credit cards debt. This process combines all credit card debt into one single loan with one interest rate. As the interest is being charged over a single amount, it reduces the amount of payment required every month and the amount paid in total interest.
- Combine Debts With Home Loan
A debt consolidation loan can help you to reduce your credit card debt. Home loan interest rates are dramatically lower than credit card rates and can reduce your debt greatly when you take advantage of this. By consolidating all your debt on top of your home loan, your credit card debt is paid out and you will only have to make one monthly repayment which is your mortgage. The majority of the time, with the increased debt on top of the home loan, the total monthly repayments will be lower which frees up extra money for you.
- Debt Agreements
A debt agreement essentially freezes all your cards and interest and allows you to pay off the debt on a new payment schedule. Through this avenue, the creditors are stopped from contacting you and taking legal action against you. By taking advantage of this opportunity, you are able to make your full repayment on a modified schedule without worrying about the debt continually increasing.
If you are finding your credit card debt is too hard to handle and do not know how to deal with it, it might valuable to take to a professional. They might be able to help you.