Getting out of debt is the crucial step, for the financial stability. In a normal year, the average consumer spends thousands of dollars in credit card debt, auto loans and mortgage payments. In November 2012, the average household had $ 7,194 in credit card debt. (Source: Survey of revolving debt to total consumption of the Federal Reserve of the United States).
Since many credit cards have a 15 - to 25 percent interest rates, consumers are losing hundreds of dollars in interest per year.
Here are seven tips to help you get rid of your debt.
1 Make a budget - people into debt because they spend more money. A budget will help you avoid going that way. Can you see how much money you earn and where the money goes. It allows you to find the areas where you are losing money by eating at expensive restaurants or a coffee, $ 5 per day.
Create a low budget you can pay for necessities such as rent / mortgage and utilities. Aside to pay the rest of your debt as quickly as possible. Must not come in the purchase of luxury goods until you have conquered your debt. Highlighting hair, buy new clothes and eat in expensive restaurants are not necessities.
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2 Leave your credit cards - Cut your credit cards if you have debt. Throwing cash instead. Paste the budget you created and only buy what you can pay cash.
Credit cards have high interest rates. The only people who should take credit cards are those that can avoid the temptation to spend too much. If you think you can go to the temptation to completely remove credit from the image. Leave your cards at home. Better yet, freeze your credit card in a block of ice, so you can not use a boost.
Read more: 7 times to avoid credit cards
3 more than the minimum - the credit card companies take advantage of the interest many users to pay as the minimum monthly payment. It is good for the credit card companies, but bad for the wallet.
Suppose you do not have to make $ 5,000 in credit card debt with an interest rate of 18%, and the minimum payment of $ 150 per month (3 percent of the total bill). It only takes 3 years and 11 months to pay off the debt, and you spend $ 2000 dollars interest. That's a lot of money.
Responsible owners pay credit card bills every month. If you can not, then at least pay more than the minimum each month until the debt paid.
4 largest debt first - you have a lot of credit card debt? Many consumers are so overwhelmed with debt that they do not know where to start. There are two possibilities:
The snowball method - Start with the smallest debt cards. Focus on paying all that, as soon as possible, even if it means that you can not make the minimum payments on credit cards. The sooner the better debt is gone. Once the smaller card is paid off, then repeat the process with the second smallest, until all the cards are paid.
The stacking procedure - Start with the card with the highest interest rates. Refund as soon as possible, while only the minimum payment on credit cards. Once your debt paid back, plus interest, to concentrate all his efforts on the card with the highest interest rate high.
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5 to renegotiate mortgage rates - renegotiating your mortgage interest rate will save you more money per month. For example, if the interest rate from 7% to 5% on $ 150,000 mortgage will save you $ 192 USD per month. (Then you can apply the money to pay for your credit card!)
Not everyone is able to renegotiate your mortgage, but if you live by job loss or serious illness in a difficult financial situation to renegotiate many lenders long as it. For your primary residence Many lenders are also participating in the Home Affordable Modification Program by the Federal Government. The requirements for this national program has $ 729.750 or less, spend more than 31% of your mortgage, their mortgage and obtain beginning before January 1, 2009.
6 refinance mortgage rates - Refinancing is another option for homeowners looking to get out of debt. Refinancing does not pay (or give) your debt. Instead, your mortgage at a lower rate restructuring.
The refinancing reduce your monthly expenses, you also have the closing costs. Closing costs vary from a few hundred to several thousand, depending on the value of your home and the size of your mortgage. In some cases, the closing costs can be more expensive than the actual savings you will get from refinancing. Compare how much you save by lower interest rates in comparison to what you closing costs. Select the option that gives you the most overall savings, even if it. Higher monthly payments, which means short-term
Read more: 4 tips to reduce your monthly mortgage payments
7 Start saving - Once you have finished paying off your credit card debt, start that more money in a savings account instead of rushing to buy a more expensive item with a credit card. Make it a habit to register in advance for purchases instead of in debt to them.
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