Credit card debt can be a daunting obstacle to financial freedom. There are many obstacles to overcome but you can break free if you can follow these three easy steps:
Step One
Add up the debt on all your credit cards and find out your interest rates. If you don’t know the interest rate on some or all of your credit cards, call the card issuer right away and find out. Occasionally you can even talk them into reducing your rate, but if you can’t, don’t worry. You can get around that too, as we will discuss later.
Step Two
Calculate your monthly disposable income, income that is free and clear after you have made all your minimum bill payments. Divide your total debt by as much of your spending money as you’re able to part with. If you owe more than you can pay back in three to six months, then it is time to consult a debt consolidation group. Typically, debt consolidation groups are only interested in larger debts of over five thousand dollars, but there are exceptions to the rule. Make sure that the final interest rate you end up with is lower than the interest you would be paying normally. To calculate this figure, estimate your monthly interest payments on all cards versus your monthly interest payment for the debt consolidation loan repayment plan. Be sure to shop around, and let the consolidation loan agent know that you are doing so; they will be inclined to lay their best offer on the table sooner.
Step Three
Once you have arrived at your decision for or against a consolidation loan, you will need to devise your repayment schedule. The terms will be clearly defined if you opted for the loan; however, you must take extreme care not to simply load up your cards again. Don’t close your accounts though, as keeping the cards around for a few more months and spending modestly, without carrying a balance, will improve your credit rating. One helpful tip is to store your cards at home except for when you intend to use them on a specific purchase. If you are trying to build up a good record with more than one card, be sure to rotate them so that they all see some minor use, and are paid back fully before due date.
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