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Whether a sudden emergency has left you with thousands of dollars in debt or you have credit cards and payments from the past that you just can’t seem to shake, debt can cripple your credit and your ability to make major purchases like a new car or a home. However, you don’t have to live with debt forever. There are ways to reduce your debt faster and make your financial burdens more manageable. Instead of just making the minimum payment and being faced with years of debt, take a look at simple ways you can eliminate your debt faster.
Target One Debt at a Time
Even though you may have monthly payments on many debts, don’t try to tackle each one at the same time when eliminating or paying down charges. Whether it’s a car payment, mortgage, credit card, or medical bills, choose one debt at a time to eliminate. Start with the smallest debt that will be the easiest and pay more than the minimum payment each month, the more you can afford, the better. If you have a credit card payment that is only a few hundred dollars a month, choose to pay that off first.
Once you have eliminated that debt, start placing the money you would be spending on a payment on other debts. If you have a payment with a high interest rate, make sure you pay it off quickly to avoid thousands in additional costs on top of your debt charges.
Start Paying in Cash
If you’re like the rest of the world, most of your payments and monthly expenses will be purchased with a debit card or removed from your checking account directly each month. While paying bills may be easier and recommended that way, other monthly expenses don’t have to be bought on plastic. Budget your money each month and allow yourself only specific amounts for items like groceries, gas, and recreational purchases.
Start removing cash from a local ATM or bank. Once you have spent the money you’ve set aside for those everyday or monthly items, stop spending. Swiping a card can lead to more money than expected to be spent. Any money left over in your account can be used to pay off large debts.
Remove Unnecessary Expenses
You may love watching the local news or your favorite television show once or twice a week, but does that really justify spending hundreds each month on cable or a television service? If you rarely use your TV or rarely use a home phone number, try going a month or two without those services. Canceling or removing unnecessary expenses that you aren’t using or infrequently use can help you save even more money each month.
Reducing your extracurricular debt not only gives you more expendable cash each month, but it lets you place those balances on other more pressing debts. Start spending what you would be paying on cable on a large credit card balance or eliminate the interest on your student loans.
Transfer Credit Card Balances
Most credit cards will have pretty hefty interest rates. This means you’ll be spending thousands more overall than what you originally charged if you only ever pay the minimum amount. If you have a large credit card payment with interest that just keeps piling up, talk with your credit card company about transferring your debts.
Transferring your credit card payments to a lower interest rate card can help you pay off those debts faster and with less money out-of-pocket. Select a credit card with little to no transfer rates and preferably a zero-interest period that will help you quickly trim down your debt without interest piling on.
Make Twice the Minimum Payment
Minimum payments are set up to allow you to pay down your balances without putting a financial strain on your wallet; however, for large balances or interest rates, paying just the minimum payment can leave you barely making a dent in your actual total. The majority of minimum payments go toward paying the monthly interest. In order to really make a difference in your total balance, try making double the minimum payment or make a payment twice a month. One payment will affect your total balance while the other will pay down your interest.
What are your best tips to eliminate credit card debt?