How to Pay off Debt
While paying off debt is not an easy
task, it is achievable. These quick tips will help get you
started.
| Make a List |
Make a list of who you owe and how much you owe. The
list should include your regular credit cards, plus
gas cards, department store cards, student loans,
mortgage – any debt. Requesting a free copy of your
credit report from
www.annualcreditreport.com may help you remember
all the cards and debts you owe. Your list should
include lender name, debt total, amount owed,
interest rate, and minimum monthly payment.
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| Prioritize your Paybacks |
Now that you have a list of all debts, there are two main techniques to
tackle your payments:
- Start small
Pay off the smallest balances first, which will give you a sense of accomplishment and reduce the total number of lenders you owe. When the smallest balances are paid, start allocating your money to paying off the cards with the highest interest rate.
- Think big
Pay off the card with the highest interest rate first because the debt on that card is costing you the most.
Following the "think big" technique will save you more money, but the "start
small" technique may make you feel better, faster. With both techniques, be
sure to pay back as much as you can every month and remember to stop using
the cards!
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| Cut Them Up |
Once paid off, cut up your card. You may also want to close the account.
Remember that closing all of your credit accounts may negatively affect your
credit score.
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| Make a Budget and Stick to It |
It is important to know what you can afford and set realistic expectations
for your monthly budget. Creating a manageable budget will make it easier to
stick to.
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| Get Help |
Buying things can be as addictive as alcohol or drugs – and just as hard to
quit. If you think you may be addicted to spending get help from a reputable
credit counseling service (Consumer Credit Counseling Services is a good
choice) to avoid getting into debt again.
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