Personal debt is inevitable in the majority of households and is often split between instalment debt and revolving debt. Instalment debt in the form of mortgages and student loans is usually a set monthly amount which people tend to budget for as a fixed expense. However revolving debt can often present a large problem as it generally means living beyond ones means. When credit card debt is a reality it should be prioritised to be paid off first as attracts high interest rates when a balance is carried.
If the debt load becomes problematic then it needs to be addressed. The best measure to reduce debt is to earn more and spend less, as if you are relying on credit to meet living expenses it can be difficult to prevent being sucked under. Look for additional work to increase monthly income, whilst at the same time drawing up a tight budget and cut out all non essential spending. Review all current financial obligations to try and cut back on unnecessary expenditure. Look for lower insurance premiums, lower banking fees, and lower cost utility providers.
Debt reduction should be considered essential spending and it is imperative to ensure at least slightly more than minimum payments are met on all credit card bills. It is also essential to stop using credit until the debt is under control. It is worth applying any savings to debt to prevent further interest accruing.
If current debt has already negatively impacted on your credit score then you won’t be eligible for the best 0% APR balance transfer cards. However there is still the option of transferring all current balances onto the card you already hold which charges the least interest. The debts with the highest interest rate should always be paid down first.
If you are still in a position to obtain a 0% balance transfer card then utilize this option as the most effective way of clearing debt. You will need to give consideration to the length of term on offer for the 0% rate; the fee charged for the balance transfer; and be certain not to use the balance transfer card for additional spending by cutting it up as soon as the balance transfer is completed.
Your budget should indicate exactly how much you can spare on a monthly basis towards debt reduction so consider how long it will take to clear the debt. It may be worthwhile paying a 5% balance transfer fee to take advantage of a longer term. Currently longer term 0% APRs are available on the Discover More card -24 months- and the Slate Visa from Chase -18 months.
Don’t fall into the trap of using a debt relief company as it will only increase your debt through charges and will negatively impact on your credit score. Aim to clear personal debt down aggressively and then establish savings with the funds which were allocated to debt reduction. Although clearing debt down can seem painful, the end gain is worth it. Make a strategy to reduce personal debt and stick to it, as there is indeed light at the end of the tunnel. Living debt free is a wonderful achievement which provides investment opportunities for the future.