Drowning in a credit card debt can be one of the worst things that could happen in your life.
It can be paralyzing that you are unable to pay your credit card debts. An average US household, for example, has more than $15,000 in credit card debt. That can be a lot of money for someone who only earns an average income.
Paying off and recovering from a credit card debt requires a hands-on strategy from knowing the best payment plans that can work for you and negotiating with creditors. And most importantly, you have to create a plan not to be trapped in the same predicament.
Here are simple ways to recover from credit card debt and stay debt-free:
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List all what you owe
In case you haven’t done this yet, you better start now. Create a tabulation of all your debts. Start listing how much you owe, identify how much is the interest rate, monthly payments, and payoff time frames. Also specify what the debt is for and who is the lender. By doing this you will have a clear picture of everything you owe.
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Transfer your debt in one card
Consider consolidating your debt instead of juggling your balances on different cards. You can do that by contacting the creditor and transfer your balances to the card with the lowest interest rate. You will have to pay a transfer free, typically 3% – but you may reduce your total interest. In this way, it will be much easier to manage your debt, and will reduce the chances of missing payment deadlines.
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Create a strategy
There are two strategies to pay off your debt.
- The Debt Snowball Method
The debt snowball method is one of the strategies you can reduce your debt. Using this strategy, you are paying off debt from smallest to largest, and as you gain momentum you are able to eliminate each balance. This may result in slow progress but you will be able to save money that you will use to pay your debts with the highest interest rates.
- The Debt Avalanche Method
The debt avalanche method is a strategy of paying off your debt with the highest interest rate. Your goal here is to minimize the amount of interest you pay and this approach helps you pay your debt faster than the debt snowball method.
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Cut Down Unnecessary Expenses
Be mindful of where you spend your money especially when you are paying off debt. List down your monthly expenses and analyze which of these expenses can be eliminated. Maybe you were having too much Starbucks coffee in a week, you can cut down that and drink the free coffee in the office instead. You may be eating out your lunches in expensive restaurants, you can cut down on that by preparing a home cooked meal and bringing it to work. Basically, cut down on buying your “wants” and focus on your “needs” first. Just a little sacrifice that could help you love a debt-free life.
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Get a side hustle
Take in extra work or find an online job to have an extra income. Earning more money can help you pay off your debt and to be able to still pay your monthly bills. You just need to work a little bit harder by adding other sources of income.Get a side hustle
Take in extra work or find an online job to have an extra income. Earning more money can help you pay off your debt and to be able to still pay your monthly bills. You just need to work a little bit harder by adding other sources of income.
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Negotiate
If all your strategies fail, talk to the licensed moneylender. Communicate your current financial situation and negotiate other solutions that might work for you in paying off your cash loan. Solutions vary per creditor which may include financing, adjusting your due date or balance transfer. This can be uncomfortable and embarrassing for you but this could be the step that you have to take to resolve your debt problem.
Now that you know how to pay off your debt, it is now your goal to stay debt-free.
Resolving your credit card problems can liberate you from the life of debt. You don’t have to worry about whether to be able to pay your other bills such as rent, utility, and internet bills.
It takes commitment to decide to not go into living a life or debt again. This means planning and saving money instead of using your credit card for big purchases. Do not let all your hard-earned income go into just paying your debt. Build an emergency fund and be mindful of how you spend your money.