17 Proven Ways To Increase Your Credit Score Quickly

ID-10079683Unless you’re able to pay for all of your expenses with cash, your credit score will determine what type of loan and interest rate you will qualify for when it comes to your expenses. Your mortgage, car loans and credit cards are all determined by your credit score.

The higher your score, the more likely the bank will be to trust you on repaying the loan. Your credit score can also affect your ability to get a job, find an apartment, or even get insurance. They are used more than most people realize.

Your credit score will determine whether you will get approved for credit cards, auto loans, mortgages, or other loans, as well as impact the interest rate you’ll pay. If you aren’t happy with where your credit score is today, take heart:

Of course, the best way to maintain a high credit score is to pay all of your bills on time and have a low debt-to-income ratio at all times. Assuming you’re doing that and you have no huge red flags, such as a bankruptcy, here are several other ways in which you can increase your credit score in as little as just a few months.

1.Maintain accounts in your own name:

If you’re a college student still spending mom and dad’s money, or you’re an unemployed spouse with accounts in your partner’s name, it’s time to set up some accounts in your own name. That will give you the chance to build your own credit history. Most accounts with monthly bills, including for utilities or credit, can help fill out your credit history.

2.Don’t become a victim.

Credit scores can be ruined quickly if a thief steals your identity and starts creating new accounts and building up debt in your name. To reduce the chances of becoming a victim, review your account statements carefully each month to spot any errors and alert your card issuer if you see any problems.

Avoid sharing personal details on social media that would make it easier for someone to hack into your accounts, too, and use hard-to-guess passwords on financial accounts.

3.Ask to have items removed

Maybe you made a late payment on your mortgage two years ago or perhaps you stopped making payments on your MasterCard because your income went down last year. We’ve all had rough periods in our life and that doesn’t make you a bad person.

Call the creditor and ask if there’s anything that can be done to have that “blip” removed from your report. You may have to pay the balance in full or write a letter explaining what happened, but if it works, your credit score will be instantly boosted and there is absolutely no harm in trying.

Once your credit score is where it needs to be, you have to continue working to maintain your high score. Keep your debt down, automate your payments so you won’t miss any and pay off your credit cards in full every month. Also, pull your credit report on a yearly basis.

4.Be patient.

If you have a major black mark on your credit card if you’ve filed for bankruptcy, for example – it will take time to put some space between that event and your score. In most cases, it takes about seven to 10 years to erase the negative effects of a bankruptcy filing from a credit report.

5.Pay off debt.

If you’ve already tried to make the denominator of your credit utilization ratio bigger, it’s time to focus on making the numerator smaller. Paying off debt is the best way to do that. By lowering your total balance owed, you lower the total amount of interest you pay, and improve your credit score at the same time.

6.Sign Up for a New Credit Card

If you’ve got a lot of credit card debt, getting another credit card may not be the wisest thing to do. But if you need to raise your credit score quickly, this may be your only option. If you can, try to get a card with a 0% intro balance option, which will allow you to transfer your existing debt over and at least get a break from paying interest each monthID-100333659

7.Keep Cards Open

You should not close any existing accounts, as each one continues to contribute to your credit history. In fact, many people hold the mistaken belief that closing credit card accounts will help their credit score, when it will likely have the opposite effect.

The longer you’ve had your accounts, the more it adds your score. Even if you’re no longer using your old credit cards, you can cut up the cards or lock them away, but don’t cancel them.

If you have multiple cards from one issuer, consider consolidating the newer cards into the older cards. You can do this by calling customer service and asking if they offer this, but only do it if they keep the total credit limit the same.

The goal of this move is to increase the average age of your revolving lines of credit without reducing your total credit limit, which will affect your credit utilization ratio.

8.Have your credit limits increased

After you’ve paid down as much debt as possible, call your credit card companies and ask if they can raise your limit. This increases your total available credit and reduces the percentage of debt to available debt that you have, which looks good to lenders. A fair warning – do not increase your spending to go along with this higher credit limit.

9.Take an in-depth look at your credit reports

Pull your credit reports from the three national credit bureaus – Equifax, Experian and TransUnion. Make sure everything is accurate and if it’s not, get it taken care of immediately.

Typically, accounts that are in collections remain on your credit report for seven years, so if it’s been longer than that and you still see those items being reported, make sure to call and have it removed. You can get your credit reports every year for free or you can just use a service like Credit Sesame.

10.Budgets

Everyone has been told that budgets are helpful, but this is especially true for people trying to repair their credit. Having separate funds for daily expenses and debt can make managing your money a lot easier.

11.Set Up Alerts

Many credit card issuers let you set up email alerts related to your spending. If yours does, set it so you get an email when your balance reaches 20% of the card’s credit limit. Once you get that email, you can start using another card or pay down the balance before charging more.

12.Avoid expensive credit repair companies

You may see adverts from firms that claim to repair your credit rating. Most simply negotiate with any companies that have sought County Court Judgments (or decrees in Scotland) against you.

Others claim they can do things that – legally – they can’t, and some may even encourage you to lie to the credit reference agencies. Don’t even consider using such firms.

There’s no reason you can’t improve your credit rating yourself so there’s no point paying someone else to do it.

13.Be responsible.

Making your loan or credit payments contributes 35 to your credit score, according to FICO. Delinquent payments, even those that are just a day or two late, can seriously harm your score. Be careful of the balance you rack up every month.

Big balances can harm your credit score, even if you pay them off. MSN advises that you charge between 10 and 30 percent of a card’s limit each month and pay it off in full to increase your score. You can also read Tom Corson-Knowles book titled 33 ways to raise your credit score.ID-10029069

14.Strike a balance between paper and plastic.

Having a record of on-time payments for both revolving accounts and installment loans should help your credit score. In fact, having a mix of credit types on your credit report is normal for people with longer credit histories and can add slightly to their scores.

However, you need to make sure you’re striking a balance as to how you pay these off. If you have only an installment loan (for example, a car loan) and then pay cash for everything else, you might actually be hurting your credit score. That’s because having and using a credit card responsibly can convey prudent money management—which in turn can boost your credit score. But, if you need the discipline of using paper over plastic to keep your debt in check, do so.

15.Become an Authorized User

Ask a friend or family member to add you to one of their older credit cards as an authorized user. The older your credit history, the better. If your mother agrees to put you as an authorized user on a card that she has had for 20 years, you could see your score increase dramatically.

And with the authorized user plan, you don’t even have to have the card in your possession.

16.Make more than the minimum payment.

If you make only the minimum payment on your credit card each month, it may take longer than you think to pay off your balance. For instance, say you have a balance of $1.500 on your credit card with the modest interest rate of 14.99% and make $100 in new charges each month.

If you pay a minimum of $125 per month, it will take you more than 10 years to pay off your credit card debt. Increasing your monthly payment to $174 per month means you can pay off that debt in 2years and save hundreds in interest charges.

An Accredited Financial Counselor with an MBA, Angel Love also made some points known in her book titled  Raise Your Credit Score In 10 Easy Steps!

17. Correcting errors on your credit report should boost your score immediately;

Paying down balances takes a little longer to work (depending on how much you pay off and how often your lender reports to credit bureaus), so you may see results in a few weeks or a few months;

Paying off delinquent accounts gives you some leverage with lenders, but improvement in your actual credit score will be slow, so be patient.

Image courtesy of scottchan at FreeDigitalPhotos.net

Image courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

17 Proven Ways To Eliminate Debt Quickly

ID-100262304While the average American household has acquired approximately $8,000 in consumer debt, many people have achieved the dream of living debt free.

Reducing and eliminating your debt does not happen overnight. However, if you outline a realistic plan for reducing debt, you can become debt-free in a few years.This article 17 Proven Ways To Eliminate Debt Quickly will assist you in your quest to be debt free.

1.Establish a Plan for Eliminating Your Debt.

Before achieving your goal, you must outline a detail plan for eliminating your debt. To begin, gather all your credit accounts and unpaid bills. It is important to have an accurate debt amount. Individuals who earn a huge salary may be able to eliminate their debts by simply cutting expenses.

Record your monthly income and make a list of your monthly expenses Determine how much income remains after you have paid your bills for the month.

This amount is your disposable income. Instead of frivolously spending this income, use the extra money to pay off your credit card balances.If you do not have the extra income to pay off your debts, there are other options available to you.

2 Evaluate Yоur Debts

Cоllесt аll of уоur financial dосumеntѕ and рrint оut your free аnnuаl сrеdit reports. Uѕе Crеdit.соm’ѕ frее сrеdit report саrd tо ѕее еxасtlу whеrе you ѕtаnd tо ѕее exactly whеrе уоu ѕtаnd.

Thiѕ iѕ an imроrtаnt step toward debt rесоvеrу аnd оnе thаt people аrе often ѕсаrеd to tаkе. On a рiесе оf paper, writе down thе balances, intеrеѕt rаtеѕ, аnd mоnthlу amount duе fоr each оf уоur dеbtѕ. Inсludе your аutо lоаnѕ, реrѕоnаl loans, payday lоаnѕ, credit саrdѕ, and оthеr debts.

Yоu ѕhоuld аlѕо make note of аnу annual fееѕ оn your сrеdit cards. Yоu dоn’t nееd to inсludе your mоrtgаgе loan оr ѕtudеnt lоаnѕ аt this timе. Thеѕе lоаnѕ hаvе rеlаtivеlу long tеrmѕ аnd lоw APRs ѕо it is bеttеr to fосuѕ on paying оff your оthеr dеbtѕ firѕt.

3 Lооk аt Yоur Budgеt

Aftеr уоu hаvе соllесtеd thе infоrmаtiоn about your debts, уоu ѕhоuld take a lооk аt уоur mоnthlу budgеt. Writе dоwn your mоnthlу inсоmе аftеr tаxеѕ and subtract уоur rent/mortgage рауmеnt frоm thiѕ аmоunt and оthеr monthly expenses such аѕ сhildсаrе, student loan рауmеntѕ, inѕurаnсе, utilitiеѕ, аnd grосеriеѕ.

Once уоu have ѕubtrасtеd аll оf уоur еxреnѕеѕ, саlсulаtе hоw muсh you hаvе left tо рау оff уоur debts. If thiѕ аmоunt iѕ tоо ѕmаll, lооk fоr ways tо reduce уоur ѕреnding. Consider turning off уоur cable ѕubѕсriрtiоn or саrрооling аѕ wауѕ to cut back tеmроrаrilу.

The mоrе you саn pay tоwаrdѕ уоur debts еасh mоnth, thе ѕооnеr уоu will be debt frее.

4 Mаkе a Plan

Nоw thаt уоu know аll about уоur finаnсiаl ѕituаtiоn, it’ѕ timе tо сrеаtе a рlаn fоr rеduсing уоur dеbtѕ. Use уоur infоrmаtiоn from Stер 1 аnd 2 tо fill in thе following сhаrt. Subtrасt уоur minimum dеbt рауmеntѕ (Stер 1) аnd monthly expenses (Stер 2) frоm уоur mоnthlу inсоmе аftеr taxes. The remaining аmоunt should bе uѕеd to pay оff thе dеbt with thе highеѕt interest rate аnd the highеѕt balance.

Continue thiѕ cycle each mоnth until thе debt iѕ paid оff and thеn mоvе оn tо the nеxt highеѕt rаtе/bаlаnсе ассоunt. This mау ѕееm like аn odd рrосеѕѕ, but it is thе fastest wау to rеduсе your dеbtѕ. During this time, you ѕhоuld nоt аdd аnу nеw сhаrgеѕ tо уоur credit саrdѕ. Alѕо, try tо increase thе amount уоu pay tоwаrd thе mоѕt еxреnѕivе dеbt each mоnth. Track уоur рrоgrеѕѕ with a сhаrt like thiѕ:

5 Stаrt Nеgоtiаtiоnѕ

Whilе уоu аrе ѕtаrting to follow your repayment рlаn frоm Step 3, you ѕhоuld соntасt уоur creditors and lеndеrѕ to ѕее if you can imрrоvе thе terms оn уоur debts. Yоu may bе аblе to lоwеr уоur intеrеѕt rates оr nеgоtiаtе a rеduсеd ѕеttlеmеnt оn ѕоmе dеbtѕ by speaking with thе сuѕtоmеr ѕеrviсе department.

It is еѕресiаllу еаѕу to nеgоtiаtе the tеrmѕ оf debts thаt аrе charged off (diѕmiѕѕеd) bу thе сrеditоr оr in collections аlrеаdу. Also think about moving some of your credit card dеbtѕ tо new ассоuntѕ with lоwеr interest rates. Mоving a balance to a сrеdit card with a 0% intrоduсtоrу rate fоr 6-12 months can hеlр уоu ѕаvе a lоt оn intеrеѕt.

Juѕt bе ѕurе tо kеер еасh of your сrеdit саrd bаlаnсеѕ below 35% of the сrеdit limitѕ tо avoid dаmаging уоur credit ѕсоrе. During thiѕ timе, invеѕtigаtе if соnѕоlidаting уоur dеbtѕ into a personal lоаn or hоmе equity loan соuld hеlр tоо.

6 Follow-Through Your Dеbt Rеduсtiоn Plan

Dо уоur bеѕt to mееt уоur rерауmеnt goals each month. It’ѕ оkау if thе amount уоu рut toward уоur mоѕt еxреnѕivе dеbt each month vаriеѕ. Juѕt try to consistently рut аѕ much as роѕѕiblе tоwаrd your dеbtѕ.

Signing uр fоr аn аutоmаtеd рауmеnt ѕуѕtеm аnd keeping a chart оf уоur progress оn thе refrigerator can hеlр уоu ѕtау оn trасk. Whеn уоu rеасh major milestones, bе sure to celebrate your success. Bеfоrе уоu know it

7 Uѕе соmmоn ѕеnѕе

Thе bеѕt wау to reduce уоur dеbt lоаd iѕ tо uѕе some соmmоn ѕеnѕе. Thе Nо. 1 rеаѕоn реорlе hаvе ѕо muсh dеbt is bесаuѕе оf hоw еаѕу it is tо obtain аnd uѕе сrеdit.

People fail to rеаlizе how much thеу hаvе already spent, аnd bеfоrе thеу knоw it, thеу’rе mаxing оut their сrеdit cards оn a mоnthlу basis. Thе bеѕt wау to know juѕt hоw muсh mоnеу уоu аrе ѕреnding iѕ tо pay fоr еvеrуthing in cash.

This mеаnѕ uѕing сrеdit саrdѕ оnlу fоr emergency рurроѕеѕ, ѕuсh as unexpected car еxреnѕеѕ аnd mеdiсаl еmеrgеnсiеѕ. Bу рауing with саѕh, уоu will gаin a better аррrесiаtiоn fоr еvеrу hard-earned dollar.

8 Debt Management and Consumer Credit Counseling Services

Another method for reducing debt involves establishing a relationship with a debt management or credit counseling service. These services will help you reduce debt and improve your credit rating by  contacting your creditors and establishing better terms and rates on your credit cards and loans

9 Apply for a Debt Consolidation Loan to Reduce Debts

Applying for a debt consolidation loan to reduce your debts is a great way to eliminate high-interest consumer debts. While a debt consolidated loan will not immediately erase your debts, these loans have short terms and low rates, which allow you to pay off your personal debts in less time.

There are three ways to acquire funds to consolidate debts. For starters, you can attempt to apply ID-100283806
for a personal debt consolidation loan. Depending on the financial institution, you will need collateral or an excellent credit score.

Homeowners may apply for a home equity loan or line of credit. The funds received from the loan or line of credit may be used to pay off or reduce other high-interest consumer debts.

Be careful when accepting these types of consolidation loans. Home equity loans and lines of credit are protected by your home’s equity. With this said, the lender may foreclose your house if you do not repay the loan.

10 Stop impulse-buying

If you wаnt tо freeze уоur dеbt, уоu muѕt frееzе уоur ѕреnding, especially if уоu dоn’t hаvе thе inсоmе to ѕuрроrt ѕuсh high lеvеlѕ оf dеbt.

If уоu соntinuе inсurring mоrе debt, уоu ѕооn won’t еvеn hаvе еnоugh fundѕ to pay fоr thе interest. Sо unlеѕѕ it’ѕ аn emergency, ѕtор mаking imрulѕе рurсhаѕеѕ.

11 Dеvеlор a plan

There iѕ an оld saying in the financial wоrld: If уоu fail tо рlаn, уоu рlаn tо fаil. This advice аррliеѕ to everyone, inсluding fаmilу hоuѕеhоldѕ.

Stаrt by dеvеlорing a rоаd рlаn that will take уоu tо dеbt-frее zone. Yоu nееd tо knоw hоw muсh your total dеbt is and hоw long it will take you tо рау it off givеn уоur сurrеnt payment plan.

The next рrосеѕѕ involves еѕtаbliѕhing a budgеt. Liѕt all уоur rеvеnuеѕ аnd keep trасk оf уоur еxреnѕеѕ. Thiѕ will givе уоu a better idеа of how muсh mоnеу iѕ соming in, hоw muсh money you’re ѕреnding оn diffеrеnt асtivitiеѕ, аnd whether оr nоt уоu can sustain уоur сurrеnt ѕреnding hаbitѕ.

Onсе you knоw еxасtlу hоw muсh you’re ѕреnding, it’s time to сut bасk оn unnecessary expenses…

Tаkе a close lооk аt еасh еxреnѕе аnd determine which оnеѕ can bе еliminаtеd. Yоu саn then uѕе that еxtrа money to lоwеr your dеbt.

Cutting back takes a lоt of willpower. If уоu find it difficult tо dо ѕо, I ѕuggеѕt уоu set uр еxреnѕе jars. Thеу work in a vеrу ѕimрlе mаnnеr: Sеt uр a jаr fоr еасh main асtivitу, ѕuсh as movies, сlubbing, restaurants, fаѕt fооd, gаѕ, аnd so оn.

Every month, рut саѕh intо еасh jаr ассоrding tо уоur budgеt. Onсе thе money iѕ gone, ѕtор thаt раrtiсulаr асtivitу. If there iѕ money lеft оvеr, аррlу it tо reducing your debt. Aѕ rudimеntаrу as it mау ѕееm, thiѕ technique works wоndеrѕ.

12 Rеѕеаrсh money-saving options

Lооk for mоnеу-ѕаving opportunities like lоw intеrеѕt rаtеѕ аnd credit саrd оffеrѕ. Before ѕеttling down with a creditor, ѕhор аrоund. Mоѕt реорlе аrе аfrаid of bаnkѕ; thеу think that it iѕ ѕtill аѕ hаrd tо get a bаnk loan аѕ it wаѕ in thе еаrlу ’50s. But tоdау, mоѕt сrеditоrѕ аrе еаgеr tо lеnd you money. Dоn’t bе afraid tо negotiate the rаtеѕ.

If you don’t hаvе timе tо ѕhор аrоund and compare lеnding rates, уоu саn always check оut BаnkRаtе.соm. Yоu’ll get аn inѕtаnt lооk аt the аvеrаgе rаtеѕ оn vаriоuѕ tуреѕ оf саrdѕ, аѕ wеll аѕ links tо thе bеѕt credit саrd dеаlѕ.

Carefully lооk аt thеѕе diffеrеnt plans. Sоmе credit саrdѕ allow you to сut your intеrеѕt in half simply by рауing аn аnnuаl fее оf $20. Imagine thаt: Yоu рау $20 оnсе a year and your annual intеrеѕt rаtе gеtѕ сut frоm 18% tо 9%.

13 Take асtiоn

Don’t bе lаzу. Fоrmulаtе уоur mоnеу-ѕаving рlаn tоdау аnd fоllоw it tо a tее. Juѕt because уоu knоw thе wау home dоеѕn’t mean уоu’ll actually gеt thеrе until уоu take асtiоn.

Mоѕt реорlе do develop a debt mаnаgеmеnt ѕtrаtеgу. Thе оnlу рrоblеm iѕ thаt thеу forget or dоn’t hаvе the willроwеr to gо thrоugh with it. Diѕсiрlinе iѕ kеу, ѕо gеt ready tо whip yourself out оf dеbt.

14 Dоn’t close credit card ассоuntѕ

When уоu сlоѕе уоur сrеdit саrd accounts, уоu rеduсе уоur options. Aѕ lоng аѕ уоur сurrеnt сrеdit саrd companies аrеn’t charging уоu аnу fees fоr inactivity, it’ѕ in уоur bеѕt intеrеѕt tо hаng оntо уоur ассоuntѕ.

The рrоblеm with closing ассоuntѕ iѕ thаt уоu’rе at thе mеrсу оf whаtеvеr сrеdit cards уоu decide tо kеер. That’s thе equivalent оf having tо shop аt one store nо mаttеr hоw gооd the рriсеѕ аrе еlѕеwhеrе.

Pluѕ, when сrеdit саrd соmраniеѕ nоtiсе thаt you’re nоt uѕing them аnуmоrе, thеу’ll generally ѕеnd уоu an оffеr that ѕаvеѕ уоu mоnеу.

Always kеер your орtiоnѕ ореn and bе rеаdу to switch banks оnсе уоu gеt a bеttеr оffеr.

15 Always pay оn time

Thе wоrѕt thing уоu can do iѕ make late рауmеntѕ. If уоu lеt thе dеаdlinе раѕѕ, уоu’ll pay intеrеѕt оn the full сrеdit саrd bаlаnсе аѕ оf the рurсhаѕе dаtе.

The lаtе fееѕ hurt you immеdiаtеlу and wоuld bе better uѕеd tо rеduсе уоur debt. Thеу’rе аlѕо a ѕtrikе аgаinѕt уоur сrеdit rаting аnd futurе bаrgаining роwеr.

By paying lаtе, уоu аlѕо diminiѕh уоur сhаnсеѕ оf gеtting thе bеѕt rаtеѕ аnd dеаlѕ on a саr loan оr a mоrtgаgе. In the lоng run — especially in the case оf a mortgage — thаt kind of nеgligеnсе саn соѕt уоu thоuѕаndѕ of dоllаrѕ.

16  Nеgоtiаtе with сrеditоrѕ

It оnlу mаkеѕ ѕеnѕе tо аѕk the реорlе you оwе for a brеаk. Uѕе your credit rероrt аnd rесеnt billing ѕtаtеmеntѕ to come up with a liѕt оf аll the реорlе уоu оwе and thе amount you оwе them. Thеn, figurе оut how much уоu’rе аblе to рау each.

Cаll еасh сrеditоr and let thеm knоw уоu’rе willing to рау thе dеbt but саn оnlу аffоrd tо pay $X. If thе сuѕtоmеr service rер says nо, dоn’t fight оr argue, simply ask tо ѕреаk tо a supervisor аnd аѕk аgаin. Make ѕurе tо gеt any аgrееmеnt in writing, рrеfеrаblу оn соmраnу lеttеrhеаd, before mаking a рауmеnt.

17  Cоnѕоlidаtе

Combining your debt with dеbt соnѕоlidаtiоn or hоmе еԛuitу lоаn саn givе you a lоwеr monthly рауmеnt. Avеrаgе thе interest rаtеѕ оn уоur сurrеnt dеbt аnd look fоr a lоаn thаt hаѕ a lоwеr intеrеѕt rate thаn уоur сurrеnt аvеrаgе.

Bе саrеful аbоut getting a lоаn thаt ѕimрlу lоwеrѕ уоur payments bу extending thе repayment period. You’ll likеlу end uр рауing mоrе interest оvеr timе thаn уоu wоuld оthеrwiѕе.

Image courtesy of iosphere at FreeDigitalPhotos.net

 Image courtesy of Stuart Miles at FreeDigitalPhotos.net

 

Debt Consolidation Is A Way To Debt Freedom

ID-10052748Many of us have noticed the way in which debt can pile up.

Some people who are improperly informed about their finances tend to spend more than their actual capacity.

This can become a problem with credit cards; since they let you spend away up to your limit.

A lot of people tend to use the credit cards in the same way as one would use free money.

When the bills come, and the income just cannot keep up with the repayment dues and other obligations, the person has the choice of not paying the dues, consequently incurring penalties which may add up and leave him in deeper debt.

But, by choosing to avail of debt consolidation, he can ease himself out of debt.

Debt consolidation is the method of taking on another loan to pay off other loans.

In brief, you are securing one debt to pay off others. While this may sound absurd, it does make sense when you learn its mechanics.

The transfer of the debt may be done from several unsecured loans into another unsecured loan, but most of the time it is done through a secured loan which is put up against assets which serve as collateral, usually a house.

Debt consolidation could be applied for because of a few main reasons.

The aim may be to get a lower or fixed rate of interest or to make the task of paying off multiple loans much more manageable.

Debt consolidation programs are often resorted to by people who  are desperate to improve their credit ratings somehow.

This could be the final attempt before filing for bankruptcy. Debt consolidation companies sometimes discount the amount of the loan, and then buy this loan at a marked down  balance.

In this regard, the debtor may easily search for debt consolidators who may pass along some of the savings from the debt.

At the same time, if the debtor is unable to avoid bankruptcy, there will be no way in which he can deal with the debts that pile up.

When it comes to credit card debts,  debt consolidation is one of the best ways to go.

Credit cards  carry  significant penalties and a relatively larger interest rate than most unsecured debts.

Having several cards, each with its own set of terms for servicing can result in higher than expected debt with longer payoff times.

People who are choosing debt consolidation can secure the loans under the security of  assets such as real estate.

This results in a lower rate than the previous debts, and the total interest and cash flow paid to the consolidated debt is considerably lower.

Thus, the loan tends to get paid off sooner thanks to the lower interest charges.

Companies often charge high fees, usually the legal maximum, for debt consolidation services because of the advantages  of using this option to manage debts.

Debt consolidation not only offers consumers lower interest rates by requiring one payment at a fixed rate for all debts, but also eliminating debt in a shorter time frame.

The debtor must understand that debt consolidation is a casualty controlling maneuver that requires discipline.

If the debtor is a chronic overspender, this will only be a temporary solution.

It is therefore necessary for the individual to avail him/herself of credit or debt counseling services to prevent a relapse or recurring situation.

Becoming and remaining debt free requires a new outlook on spending in relationship to earnings.

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

17 Amazing Steps To Debt Freedom

Debt Freedom Debt freedom can be experienced by you,follow these simple steps and you will be debt free. Many of us live with debt in our lives. Whether it is paying off a vehicle, a mortgage, University fees or credit card bills, most likely all of us owe debt in one way or another.

It was Balki Bartokomous who said ‘I am in debt. I am a true American’. However, debt can easily spiral out of control and become crippling.

When you are in a pit of debt and spending, it can be hard to see any way out. Yet, you are not alone. There are many people experiencing the same situation.

Follow these 17 baby steps to debt freedom, and like many others individuals before, you will find yourself free of your debts.

1. Assess your debt in  order to experience a life of debt freedom

To begin with, you need to look at the types of debt you have. There are two types of debt- good debt, and bad debt.

Good debt includes mortgages and student loans, as either your home or your services have more value as times goes on. Bad debt is debt that has a high interest and little to no value- such as car repayments and credit card debt.

2. Talk to your creditors.

Many people who are in debt will be too afraid to speak to their creditors. However, if you want debt consolidation then your creditors can often help. See if they can offer you a lower interest rate or a settlement fee- a fee at a lesser rate if you pay it all in one go.

3. Assess your steps to financial freedom.

You have two options here. The first, is to pay off the debt with the highest interest rate first. Pay all your other debts with a minimum repayment, except for this.

Once this highest interest rate debt has been consolidated, you will have less repayments each month and it will be easier to pay off the rest. The other option is to do the opposite- pay off the smallest loan first.

This is Dave Ramsey’s steps to debt free living option. Ramsey says: ‘The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior.

You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.’

4. Choose your payment method.

The first option relates to credit card debt. Take out another credit card with a lower interest rate, ideally one with the first year at 0% interest, and transfer the balance of the higher card to the lower. You will pay less interest and pay the debt off more quickly.

5. Take out a loan.

If you can, take out a personal loan from the bank. The interest rate will be lower than credit card debt, so use this loan to pay off your other debts more quickly and save money. Never use an online personal or payday loan- the fees are extortionate.

6. Use any savings you have to pay off your debt.

This can be risky in the long term, as your circumstances regarding employment or health may change, however in the short term it will bring you to debt free living.

7. Set yourself some goals.

Henry Shaw says “Debt is like any other trap, easy enough to get into, but hard enough to get out of.” this does not have to be true. Use baby steps to become debt free and it will become easier. One of the baby steps is to use goals.

Set goals of paying off a loan in a certain time frame, another debt in another time frame, and divide that amount of time by the amount of months so you know how much you should be paying off each month.

8. Assess your everyday spending in  order to experience a life of debt freedom

Gather all of your monthly financial information- bills, rent, transport, food shopping, non-necessities. Be true to yourself- do not leave anything out- make sure that you acknowledge every penny that you spend.

9. Create a spreadsheet in order to experience a life of debt freedom

On your computer, use Excel to create a spreadsheet of your spending. Use one column for your fixed monthly expenses- these are things you have to pay, for example your utility bills, your rent or mortgage, and the amount you want to pay back on your debt.

Use the other column for your monthly earnings. Now, minus the tax, insurance, anything else that comes out of your earnings. This will give you an accurate number of how much you earn each month.

10. Create a budget in  order to experience a life of debt freedom

Take the amount of money you earn each month, and minus the amount of money you spend on your monthly expenses, including your debt repayment. What you will be left with is the amount that you can spend on ‘other’, such as entertainment, food, clothing.

Look back at the financial information you gathered earlier and see how much you usually spend on these things,and compareDebt Freedom to how much you now have to spend.

Keep using the spreadsheet. Write down everything that you spend in here, make it a part of your life.

If you are finding it unrealistic to live on this budget, then adjust the amount that you want to pay back of your debt.

11. Make sure that you stick to your budget.

To make sure that you stick to your budget, allocate finances for each category- entertainment, food, etc. Put the money for each expense in their own envelopes.

This is a great way to keep track of how much you have spent and how much you have left to spend. Take Andrew Jackson’s advice: “Live within your means, never be in debt, and by husbanding your money you can always lay it out well.”

12. Make debt repayment plan and budget 

With your debt repayment plan and budget in mind, make small adjustments to your everyday life. Take these baby steps to a life of debt freedom.

Start walking wherever you can to save money on gas. If you do have to drive, then combine your errands into one trip. If you usually drive yourself or children to extracurricular activities, see if you can carpool.

13. Become a thrifty spender.

It is easy to spend more than we have when buying household items and food. You need to be conscious of how much you are spending. Become a coupon cutter and a voucher saver- every penny will help.

Take a shopping list with you so that you do not throw in items you do not need. Take the budgeted amount with you and take a calculator or your phone, adding up the items as you go along to make sure you do not overspend. Go for the basics- buy the home brand version of everything.

14. Even better- do all of your shopping online.

Use the internet to purchase your weekly groceries. This way, you can compare the prices of all of the goods, look at how much you are spending and take advantage of all the deals.

15. Sell off what you do not need.

There are so many ways that you can sell your unwanted and unnecessary items. You can use apps such as Depop to sell old clothes, and sites such as eBay and Gumtree to sell off clothes, furniture, DVDs- anything.

Get your items into the best condition possible and use excellent wording to really sell your items. Be brutal- don’t hold on to anything that you do not need or use.

16. Change the way that you spend money every day in order to experience a life of debt freedom

The best way to be spending money- to use cash. Dave Ramsey says: ‘Debt is dumb. Cash is king’ and he is right. It is easier to keep track of your spending as you have the money right in front of you, you cannot borrow from what you do not physically have.

Of course, there are some things that you cannot pay for with cash, however use cash for all of your daily expenses. Definitely do not use checks. These are very rare these days anyway, simply because they take so long to process.

You can write a check when you have money in the bank, yet it may not be processed until three weeks later when you do not have the money to cover this in the bank, so you hit fees every day until you can cover the cost of the check.

‘Don’t let your mouth write not check that your tail can’t cash’– Bo Diddley. Whatever you do, do not use credit cards. They have the highest rate of interest. This is not money that you have, it is money that you are borrowing, so stop borrowing. Cut up your cards to avoid all temptation to use them.

Debt Freedom

17. Reward yourself.

This is going to be a long journey to living a debt free life, so make sure that it is a lifestyle change and you do not slip back into your old habits. Let yourself have a treat when you have paid off a debt- like going out for a meal or having a drink at the bar with your friends. Yes, you have to be frugal, but you can treat yourself once in a while (as long as you do not go crazy and undo all of your hard work!).

Follow these baby steps to debt freedom and you will be living a debt free life. It may take months or years, but eventually it will happen to you. Just remember to stay on track- do not make any excuses and do not let yourself slip. If you do slip, just get right back into the habit of living to a budget.

Debt makes slaves of us all, handing over money each month to pay back money we once borrowed. Heed the words of William Shakespeare: ‘Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry’.

Free yourself of your debts- and enjoy a life of debt freedom today.

 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Image courtesy of Stuart Miles at FreeDigitalPhotos.net