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Earn more money
The simplest way to do debt reduction is to find a way to earn extra money and use it to pay down your debts. For example, you might be able to take on extra shifts at your work or get a second job weekends or evenings. It's almost always possible to find part-time jobs in the hospitality or food service industries. When I was young and struggling, I was almost always able to find part-time jobs as a hotel front desk clerk. If there is some reason why you couldn't take on a second job, you might be able to earn extra money as a handyman or if you have the requisite skills by building an online store. Of course, the biggest pitfall is that this takes time, energy and a very strong commitment as working an extra shift or second job is never any fun.
Reduce your debt with a 0% interest balance transfer
If your credit card debts have high-interest rates, you might be able to transfer them to a card with a lower interest rate or even one that offers 0% interest for some period of time. Almost all the credit card networks are now offering 0% interest balance transfer cards. The advantage of these cards is that they would give you a timeout of anywhere from six to 18 months during which time you would pay no interest at all. If you could transfer your balances to one of these cards, all of your payments would reduce your balance instead of paying interest charges. This would help you reduce your debt – maybe even down to zero if you could heavy up on your payments during that introductory period of zero interest.
The pitfalls of a balance transfer
The biggest pitfall of a balance transfer is that you may not qualify for one of these cards. The "catch 22" of a 0% interest balance transfer card is that you have to have reasonably good credit to get one and if you're having a serious problem with debt, you probably won't have very good credit. Plus, if you continue to charge against that card, you could end up with a bigger balance at the end of your introductory period then when you made your balance transfers.
Get a loan
Many families have chosen debt consolidation loans as a way to handle their debts. This seems to be a simple solution because all that's required is to borrow enough money to pay off all your debts. You would end up with a lower monthly payment and only one payment a month. You should also have a lower interest rate.
The downside of a debt consolidation loan
The downside or pitfall of a debt consolidation loan is that it doesn't really do anything to reduce the amount of money you owe. You might have just a single payment to make each month and a lower interest rate but if you owed $15,000 in credit card debts, you would have to borrow $15,000 to pay
them off. In short, you would owe the same amount of money.
Debt reduction through debt settlement
The one true way to achieve debt reduction is by negotiating debt settlements for less than you owe. If you are six months or more in arrears on your debts, you could contact your creditors and offer to settle your debts for maybe fifty cents on the dollar. While not all creditors will settle out, many of them will – especially if you can convince them that it's either that or you would file for bankruptcy.
The pitfalls of debt settlement
There are two pitfalls to debt settlement. First, you have to be a pretty good negotiator. Second, you have to have the money available to pay the settlements you negotiate. It is for these reasons that many families have used National Debt Relief to settle their debts. We typically save our clients thousands of dollars and help them become debt-free in two to four years. Contact us today for more information on debt settlement and how it could help you.