With the ever-rising cost of living, debt is something that piles up is a major cause of stress. We often find ourselves in a financial crisis and we try to extend our credit, just to find out that we are again facing the same problem. Thus, the over-extended credit just keeps adding up and magnifies the current debt.
In the case that you are unable to pay off your pending bills or find yourself trapped with increasing debt, there are some debt reduction solutions you can use in order to control your finances better. It is important to look up the similarities and differences between the two solutions in order to understand which of these is better for you before making a choice.
1. Debt Consolidation
Debt consolidation programs are excellent alternatives to bankruptcy and offer consultation to manage and reduce debt. They also provide you with options to handle credit card debt.
- These programs can plan your finances and give you a consolidation loan to pay off your debts.
- They offer specialized consolidation in the case of credit card debt.
- They have a very low interest rate and you are required to make only a monthly payment. This is planned keeping in mind your financial situation.
- You can use these programs with secured and unsecured loans.
2. Debt Settlement/Negotiation
A debt settlement consultant will reach a settlement with your creditors to drastically lower your interest rates. Up to 50 per cent reduction is possible. This system works because creditors are interested in obtaining their money and hence they will be willing to reduce their rates as they know that they stand a better chance of getting their money in this fashion rather than from a person who declares himself bankrupt.
- You can choose the debts you wish to include in the debt settlement program.
- There is no guarantee that all creditors will accept debt settlement though most will.
- You will still be responsible for all secured debts incurred.
- This system is most suited for people who are employed and are working hard to clear their debts.
Credit Card Debts Solutions
Each time you swipe your credit card, you are further pushing your credit limit and adding to future expenditure. You can begin saving if you change your spending habits and reduce or eliminate the use of credit cards. Credit card companies offer attractive benefits and schemes to lure the user into making a lot of non-essential expenses as they stand to make a profit from pending balances.
Lenders also tend to avoid lending any money to people with a bad credit card history or a high amount of balances. Bad credit is an extremely bad partner to have when you are in need of a loan for making a huge purchase such as a home or car. It is possible that bad credit does not go against you in obtaining a mortgage or finance but the terms of finance may be very narrow and binding (as in a higher rate of interest or a bigger down payment) which basically adds up to yet more losses and possibly more debts.
Tips for Reducing Credit Card Debt
- The best way to cope with credit card debt is to stop the problem at its source; that is to stop using the card. Cutting down on those expenses could help you save money which you can use to pay off your debt.
- The minimum payment you need to make is just about equal to the sum required for the finance charges. For quick reduction, keep track of this and make a higher payment than the minimum payment. The more you pay the sooner the debt clears off.
These are a few of the debt reduction solutions you can use to eliminate debt from your lives. The best thing of course, is not to incur debts at all but if that is inevitable it is equally important to take charge of your finances and keep your debts under control, in order to lead a stress free life.