How can I reduce my debt?

Answer:

Debt reduction strategies play an important

role in both getting out of debt as well as getting ahead. Whether you are swimming in debt and need out or if you are working toward a brighter financial future, try these steps to reduce two of the biggest drains on your budget, credit card debt and home mortgage debt.

Credit Cards
Most credit card users carry a high balance on their cards with a reported average of $8000. In addition to the amount owed, the interest on that debt will take a big bite out of your budget. The sooner you can reduce this debt, the better.

1. Always pay more than the minimum due on credit cards even if it is just a few dollars. By only paying the minimum balance, you will never reduce the amount you owe.
2, Pay off higher interest cards first. Focus on reducing your higher interest debt first so that your dollars stretch further. Once your high interest card is paid off, cut it up.
3. Rethink your lifestyle and credit card usage. Unless you are in a position where you can afford to pay off your balance each month, use credit cards for emergencies only.

Click here for a free debt consolidation solution

Home Mortgages
Mortgage debt is often considered “good debt” because interest is tax deductible and because you are likely building equity. However, reducing your mortgage debt never hurts. By reducing the principle, you can save tens of thousands of dollars in interest over the course of your loan.

1. Consider refinancing to get a lower interest rate. Loan calculators abound on the internet, do the math and see how refinancing can save you a bundle. QandAs has a variety of calculators that address interest rates, closing costs, and more here: Refinance Solutions

2. Consider a shorter term. If you currently have a thirty year loan and can swing the slightly higher payments of a fifteen year loan, do it! You’ll reduce your mortgage debt much faster with a higher portion of your monthly payments going toward the principle. Not only will you build equity faster, you’ll also pay off the loan in half the time, saving tens of thousands of dollars in the process.

3. If refinancing isn’t appropriate, you can still reduce your mortgage debt by applying extra money each month. Make sure you specifically notate these extra payments are for reducing the principle amount so that your lender applies them properly. Also make sure there aren’t any pre-payment penalties on your loan.

TrackBack URI for this entry