Avoid these methods
to reduce your debt... It only takes a
few missteps like missing a payment or exceeding your credit limit to turn a healthy
credit situation into damaged one. Before you know it, the bills are piling up
and you're deep into credit card debt. If
you find yourself in this situation, there's a right
way to reduce your credit card debt - and a wrong way. Below are some common
mistakes people make when trying to reduce their outstanding debt. Although some
of these methods may seem like good options, they're likely to get you into more
trouble: 4 MAJOR NO-NO's!
- DON'T get a home equity loan to pay everything
off: It may seem like the simple solution - but in reality, you're gambling
with your home to pay off your credit card debt. And it's not cheap to complete
the process. Why don't you just create a budget and start managing your money
correctly? The truth is, most people who shuffle their debt around without changing
their bad habits not only end up with a second mortgage, but even more credit
card debt.
- NEVER use your 401(K) or
retirement savings to pay off debt: The tax advantages that apply to your
retirement accounts will not only be lost, but you'll pay twice! You'll pay a
10% penalty for early withdrawal and taxes on the full withdrawal amount - meaning
you'll only get about 65% of the money you take out of your retirement acount.
DON'T DO IT!
- Don't 'Rob Peter to Pay
Paul' with a cash advance : Applying for a new credit card and taking out
a cash advance to payoff your old credit card is doing just that. Not only is
there a 3% fee, but the exceptionally high interest rate will go into effect the
minute you initiate the process. Cash advances are a bad idea for any reason!
- Just say NO to payday loans / advances.
APR's on payday loans can be as high as 35% with a wide range of fees. Why would
you take out a high rate loan to payoff your debt? Even if you're paying just
as much with your credit cards-- you're accomplishing nothing.
If
you're trying to reduce your debt, the first step is to change your attitude and
have a realistic game plan. It's not going to happen overnight! It takes time
and persistence to get your credit back on track. Cutting
up your credit cards is probably a good idea if you can't control your impulses.
Try to live on cash and checks - and, more importantly, live within your means.
Once you start chipping away some of your debt, you might consider a good 0%
interest credit card so you can transfer your remaining balances and pay zero
interest. This could help you reduce your debt even faster if you can avoid making
too many new purchases. Here's more steps
to reduce credit card debt...
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