Interest on loans and credit cards can add up quickly and sometimes can even end up costing more than the actual cost of the item you purchased. It doesn't matter if you are struggling to meet your monthly bills or have the extra money to pay it, either way, it's a good idea to pay your loans and credit card debt off quickly to avoid the additional fees. Luckily, there are a few ways to accomplish this without the need for taking more money out of your pockets.
Reducing the interest on your credit cards
Most people have more than just a few credit cards and because of this, it's hard to pay more than the minimum required payment. What happens, as a result, is that you barely touch the actual balance. Instead, your monthly payment simply goes towards the interest, keeping the outstanding debt high. The good news is that there are companies like Credit Soup that know the pros and cons of many credit cards. They have a listing and the benefits of each card and what's required to apply for them. If your credit score is in good standing, you can apply for a new credit card that offers a balance transfer. This will allow you to transfer the balances from several cards onto the new one and have one monthly payment. Also, most, if not all of these credit cards, have an introductory period between 6 to 12 months that's interest-free. This gives you the chance to pay down your outstanding credit card debt without any more fees added.
Debt consolidation is a great option if you have other loans such as car payments, student loans, and unpaid medical bills. These loans are through banks. In order to qualify, you must have good credit and something that they can use as collateral, like as a home. Since it is a loan, it's up to you to do the right thing with the funds and use it solely for the purpose of paying down your debt. If you use the money wisely, this is a fast way to pay off most, if not all of your outstanding debt and then pay one affordable monthly payment.
Refinancing your mortgage
If you purchased your home 10 to 15 years ago when the interest rates were very high and you haven't refinanced in recent years, you're missing out on a large savings. You can refinance for the amount you currently owe so that you don't owe for another 30 years, or you can choose to refinance your loan and use the equity you have to pay off your outstanding debt. This means that not only will you reduce the amount of your monthly mortgage payment by hundreds of dollars, but you can also stand to lose another few hundred dollars or more in credit cards payments and other debt.
Borrowing from your retirement
Borrowing against your retirement is not usually something that anyone would advise. However, if you are paying ridiculous amounts in interest each month on your debts, borrowing from your 401K retirement account can actually help to give you a fresh start. Since it's your money, the repayment goes directly back to your retirement account with interest, either monthly or bi-weekly, depending on how often you receive a check from your employer. The plus side is that you'll unload the debt completely. On the downside, if you should lose your job in the midst of the repayment, you won't have as much as you did for retirement.
There's nothing wrong with having a few credit cards that you use regularly. But, other than an unplanned emergency, the balances that you accumulate throughout the month should be paid in full upon receipt of the bill. If you use your cards wrong and they are there to purchase things you otherwise can't afford, you're not going to be able to sustain your debt.
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