Getting Out Of Credit Card Debt

Credit cards are easy to get, convenient to use and universally accepted. The problem comes when you are unable to pay back the money you owe. Credit card companies charge whopping interest rates in excess of 13% and the minimum payment covers only the interest. So you can keep making interest payments for the rest of your life, but your debt will not go down by an inch. And it becomes progressively difficult to make even interest payments, as your spending outpaces your earnings. It also becomes more and more difficult to get additional loans, since your credit rating and scores tank further with each missed payment. Outlined below are a few tips for getting out of credit card debt.

Before you even begin to fight the debt, you need to accept the fact that you are in a mess, and it needs making some hard choices and sacrifices to get out of the hole. The second step is to stop all unnecessary spending and focus on financing essentials and reducing the purchase price of these essentials using clever shopping techniques and research, such as use of coupons, discounts and reducing travel expenses by using public transport or car pooling. Once you get to a stage where your expenses go below your earnings, you can start thinking about the debt.

Now the debt may still be out of reach, but there are ways to slowly bring it under control. Use the debt snowball chart to work out what to pay and when to pay. If you have any equity left in your home, get a second lien and consolidate all the debt under a low interest loan, if possible. Focus on full prepayment of one debt, then move on to the next and so on, while keeping all lenders happy with minimum payments. It gets progressively easier, as your debts clear up, freeing more money each month for the other debts.

If you find yourself stuck in a situation where you are unable to meet even minimum payments, talk to your lenders. Discussion always helps, and credit card companies will likely reduce your interest rate and allow you to pay the new and lower minimum payment, rather than write-off your loan. Try to seek help from close family and friends. Trying to hide your debt never works and your loved ones would rather see you happy and debt free, even if they do have to lend you money. Find a second job and tap into any savings or investments you have kept aside. It’s better in the long run to be debt free than lose 20% on debts while making 12% or 13% on investments.