#bad credit debt consolidation loans
Methods for Debt Consolidation
4 Steps to Help You Get Out of Debt
Is your bank account crumbling under the burden of debt? Do you struggle to pay your bills at the end of the month? You’re not alone. Personal debt continues to run at record levels around the globe. Fortunately, reducing your debts is almost always possible, and these fundamental steps will set you on the right track.
1) Make a Budget: The single biggest reason for personal debt is living above your means. This is why it is so important to create a budget and make sure that you stick to it. The first step in any solution is understanding the problem, so begin by tracking your expenditure. Be brutal with yourself: don’t ignore minor items or try to convince yourself that something is a one-off purchase. Make sure you list everything. There are many websites that provide the necessary advice and sample formats to prepare a proper budget, so take advantage of them. Having a detailed, accurate overview of your income and expenditure allows you to find where your income is going and helps you make the changes necessary to reduce your debt.
2) Prioritize Existing Debt: Once you’ve sorted out your budget, you need to look at your existing debts. There are two ways to approach debt prioritization: by size and by cost. Financial advisers usually encourage people to prioritize by cost. This method targets the debts that carry the highest interest rate first. The idea is to get rid of or reduce the debts that cost the most money every month in extra interest, so that the long-term total falls. If you’ve reached the point of defaulting on your debts, this may not be an issue.
Prioritizing by size means that you target the smallest debts first, to wipe out the annoying little ones, then concentrate on the big ones. The idea is to reduce the number of creditors and get positive marks on your credit report. As a bonus, bigger creditors tend to be more flexible with repayments, so you can often convince them to make do with minimum repayments while you get rid of the little ones, in return for bigger regular payments later on. Whichever method you choose, make sure you keep up minimum payments on all your debts, while you make a bigger payment to the one you’ve prioritized. As you begin to knock creditors off your outstanding debt list, you’ll build momentum and get out of debt a lot quicker than if you tried to make equal payments to each.
3) Consider Refinancing: There are plenty of debt consolidation companies that will help you refinance your current debts at a more beneficial rate. Negotiating even a 0.1% reduction in your current interest rate can be useful when it comes to getting out of debt and freeing some additional cash. Make sure you do your research, though. Reliable refinancing companies abound, but the industry is also rife with scammers and sharks. Check around, both online and off-line, not only for the best possible deals but to ensure the company is properly registered and regulated.
4) Save on Groceries: Groceries are an essential component of every household budget, and often represent a surprisingly large percentage of overall expenditure. If there is one area where you can make important savings, this is it!
- Start by selecting cheaper products in the supermarket, instead of more expensive branded items. If they’re of sufficiently good quality, opt for own brand products.
- Keep an eye out for bargains and reductions in your regular product ranges as well, but resist the temptation to buy new items simply because they’re on sale.
- Try to stockpile your frozen and dry goods during sales and promotions. Make sure you keep track of expiry dates, or you may end up losing more money than you should be saving!
- Make use of all the coupons you can find in local newspapers and online.
You can also save on groceries by spreading your shop across several supermarkets. Although many now run price comparison schemes, whereby they hope to always offer the lowest cost for your whole shop, it is still possible to make significant savings by buying each item from the cheapest seller. The extra exercise in walking around several markets will also do you good.
Being in debt is one of the biggest causes of stress and anxiety in life. Use these tips to build a solid foundation for financial recovery. Just remember to be tough with yourself and stick to your budget, even once you are debt-free. You don’t want to fall back into the pit and go through the same hardship again!
Debt Facts (2014):
- The average amount of credit card debt per household in America is approximately $15,250.
- The average household student loan debt amount is approximately $34,000.
- All tolled, Americans owe nearly $12 trillion in total debt, and nearly $860 billion in credit card debt.
- Each year, Americans pay over $20 Billion in credit card fees and penalties!
- Sources: Nerd Wallet and the U.S. Federal Reserve
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