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Pay More than the Minimum
If you can afford it, pay more than the minimum amount each month. Paying just the minimum amount only increases the time it will take to finally clear the debt. If you take longer to pay off a debt, you’ll end up paying more because the interest on it will accumulate. Try to supplement your monthly income so you can pay more than the minimum amount. You could go into blogging or take a part time job.
Snowball Your Debt Payments
Gather all your credit cards and write down the interest you’re paying on each. Find the one that has the lowest interest rate. If you have a high interest rate card, consider transferring the balance to the lower interest card. If your high interest card has a balance that’s too large to transfer to the low interest credit card, you might transfer the other debts to it, and then pay it off as fast as possible. When you pay off the balance on that card, move to the next and pay it off as fast as you can. You might also be able to transfer the higher interest debt to a lower interest card, taking advantage of one of the many promotional offers now available.
Cash Out Your Savings
Cash out your savings and investments and use the money to pay off your debts. This might not seem like a good idea because your investments act as your financial security. However, desperate times call for desperate measures.
Borrow Against Your Life Insurance
Individuals with a life insurance policy that has a cash value could borrow against it. The interest rate is below the commercial rates so you can take your time to repay the loan. However, do keep in mind that if you die before you repay what you’ve borrowed, the remaining balance plus interest will be deducted from the face value of the policy.
Get a Home Equity Loan
If you are a homeowner and have equity that has accumulated over the years, you could consider a home equity loan. A home equity loan offers two good advantages. First, you could use the proceeds from the loan to pay off your debts. Second is through itemizing deductions on your income tax returns as the interest you pay on one of these loans is usually deductible.
Borrow From Your Retirement Plan
Most retirement plans will allow you to borrow up to 50% of the account’s value or $50,000, whichever is less. This method is best if you are paying off high interest debts because you pay off the debt immediately and prevent it from accumulating. However, this method has drawbacks as you are required to pay back the money within five years.
Renegotiate Terms with Your Creditors
Let your creditors know your situation by telling them the truth about your current financial situation. In most cases, they will be willing to listen to you as they know it’s best to settle for less rather than see you file for bankruptcy.
Don’t make this mistake
Many people run into problems with debt again once they have repaid what they owe. This is because they are debt free and feel they can start using their credit cards frequently again. Keep your credits cards away and use them less often so that you do not find yourself running into massive debts.