A Guide To Reducing Debt

2007-03-08 10:33:40

( Financial )



Most people tend to live beyond their means at one time or another and before they know it, their debts have piled up to unmanageable levels. If you are one of these people, then you might want to start reducing debt before they overwhelm you. All you need is to commit yourself to the process and make some positive changes on your attitudes toward money.

Dealing With Credit Cards

Credit cards provide convenience but at a very high price. Often, you find yourself charged staggering amounts of interests and fees. If you don’t know exactly how much of your money goes to paying those charges, take a close look at your next bill and you will be surprised. Being a wise credit card user is an excellent way to start reducing debt. First, close all inactive and delinquent accounts by writing to your creditors. Keep only those that give you the lowest rates. Afterwards, report these changes on your credit accounts to the three credit reporting agencies so that they will be reflected on you credit report. Keep the balance of all your remaining cards below 25%. If you can, try to reduce the balance to 0 at the time of the month when creditors report to the bureaus. Request credit card companies to reduce your credit limits on your accounts; this way you will not only be more disciplined in your spending, you will also improve your credit scores on your credit report. Just make sure that all these changes are reported to the credit bureaus!

Consolidate Debt

If the interest rates you pay are becoming unwieldy and unmanageable, you may choose to consolidate your debt. Theoretically, consolidating debt is recommended for paying off credit cards and other high interest loans. Debt consolidation most often involves a secured loan against an asset of yours. This way you can avail of lower interest rates on a loan that in turn you will use to pay off other debts. However, reducing debt through debt consolidation won’t help you much if you continue making expensive and unnecessary purchases through credit cards. In short, a change in credit card habits is necessary

Consumer Debt Counseling

The process of reducing debt can be very stressful and often exasperating. If this is the case, then you can contact a non profit debt counseling service to help you. They will guide you through a list of options you can take and advice you on how to better manage your finances. Consumer debt counseling can give you the guidance which you need to successfully manage your debt.

Your Success Depends On You

Whether you succeed or not mostly depend on you. Reducing debt requires you to take a proactive approach to spending. Avoid impulse buying and making unnecessary purchases. Being financially disciplined will save you the headaches and stress of dealing with overwhelming debt in the future


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