Financial Editor Farnoosh Torabi takes 2 minutes to clear up a complex topic. Clearing your credit card debt can be simple and done in 3 steps, so you can get started today.
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Debt
Clear Your Credit Card Debt
Is Debt Consolidation the Right Solution?
Being in debt is a situation that most people want to change. Having debts hanging over you can make life feel like it’s out of control. It can add stress to your relationship, your daily life and it can interfere with your sleep and health as well.
The problem is that getting into debt is easy, but getting out of it is much harder. If you miss payments then the interest that you owe will spiral upwards. You’ll have creditors chasing you and that can add to your level of stress. It’s all too easy to find new credit cards to put expenses onto, but paying them off is a different matter.
What you have to do though, is confront the problem. Putting debt repayments off or trying to push them to the back of your mind will just make the situation worse. Taking positive action to start paying off debts will help you enormously mentally, as you’ll begin to feel you’re moving towards being clear of debt.
There are different ways to go about paying off multiple loans and credit cards but one popular choice is use a debt consolidation loan. This is where you pay off all your existing debts to multiple creditors by taking out one large loan to cover all the existing debt and interest outstanding. Often you can get a lower interest rate for the consolidation loan than you would pay by paying off each debt separately. Old debts are paid off, and you have one new loan to pay, with one monthly payment to find rather than several. It also means that you only have one point of contact for your debt, which lifts the administrative hassle from the situation.
However, you need to understand that debt consolidation does not eradicate your debt and free you up to spend again. You still have to pay it off, and you need the self-discipline not to apply for fresh credit cards and store cards until you have cleared the debt consolidation loan. Many people find that they can’t resist spending again, because the debt consolidation makes it feel like their debts have been paid, and they end up in the same situation they started in.
Debt consolidation is not something you should enter into without proper consideration. However, it is a sensible choice for some people who otherwise might get so far in debt that they see declaring bankruptcy as their only choice. Declaring bankruptcy can be detrimental in terms of your credit record and the safety of your assets, so if you can avoid it through options such as debt consolidation it is much better.
Bio: Gemma has now been debt-free for three years. Rather than face the implications of bankruptcy she found that debt consolidation was the best option for her. While everyone’s situation is different but hopes that through writing she can offer advice to others who might be struggling with debt.
Refinancing Mistakes to Avoid at All Costs
When it comes to refinancing, there are a couple of things which could cause you some really serious financial troubles unless you are really careful. Therefore, make sure you read the following lines and use the information wisely in order to avoid such a situation.
Finding the Perfect Product
First of all, it is very important for you to shop around before deciding upon the ideal financial product that will help you refinance. If you stick with your current lender and are not aware of the other alternatives made available on the market, you will not be able to get the best out of the situation.
Furthermore, if you assume that the rates applied to your account are the only important aspect that is able to help you save some serious money, then you will also be wrong, since there are a great number of other important aspects as well, such as the annual rates and other fees which will be applied to your account and will influence your saving process.
Knowing the Expenses
As a future customer, you should most definitely lock the rate you want to be applied to your new account in writing in parallel with the development of the process. Furthermore, if you do not make some other aspects clear, such as the establishment fees and every single aspect that could influence your process of saving, you will not be able to get the best out of the situation and your savings will really be affected.
Another very common mistake is to rush and to things on your own instead of getting the help of a mortgage broker. Everybody knows that only with a mortgage broker you will be able to have your credit analysed properly and you will eventually be provided with a complete list of the most compatible product for you and your financial situation.
Avoiding the Temptations
A great number of applicants are tricked by the honeymoon rates that will be applied to their accounts and completely forget about the time they will revert back. In most of the situations, the chance in the rates will lead to a really unwanted situation and will cause you some severe financial harm if you are not constantly careful with every single aspect related to the rates.
Furthermore, if you fail to do your due diligence whenever you want to find the ideal home loan for you, for example, then you are likely to become a victim of predatory logic. This situation should also be avoided by all means and you should be really careful with it.
Switching Between Offers
Avoid by all means applying for a financial product that only pushes your loan with up to 80%. There are a great number of such offers currently distributed on the market, but they will provide you with almost no advantages since your benefits will be very little.
Furthermore, sometimes you might be provided with the opportunity of applying for an almost identical product with some other lender and you will be promised that 10 basis points will be saved with your new application. However, this situation is to be avoided since there will be almost no advantages provided to you, but instead the level of comfort will see a decrease.
Finally, you should also avoid switching your type of rate, from fixed to variable and vice versa, just because of a possible lower value in that specific moment. You will eventually regret this move when the rates chance their value again, so this solution is totally not a wise move and it is totally not recommended.
This article was written by William from Home Loan Finder.
Stay-At-Home Mom Paid Off Over $70,000 in Debt and Quit Her Job
Jaime from Eventual Millionaire paid off over $70,000 in debt and quit her job. She wanted to start a family and be a stay-at-home mom. When she added it all up and looked at the short time frame that she wanted to do it in, she cringed. She made $100,000, two-thirds of the household income of about $130,000 a year. She knew that the first step would be to become debt free. After reading Dave Ramsey’s Total Money Makeover, she started selling her cars and learned to balance a budget. She focused on paying off her debt and eventually became debt-free and quit her job.
Jamie’s story of how she became debt free and was able to quit her 9-5 job. Read more about it at her blog.
Bye-Bye Student Loans
I have about $3,200 in my student loan balance and about $112,000 in my mortgage loan balance. My student loan interest rate is at 3.875% and my mortgage loan rate is at 5.75%. I have $5K cash that I can use to contribute towards my loans. At first, I wanted to use the extra money to pay off my mortgage loan first, since that has a higher interest rate. But, after consulting with my accountant, he told me to pay off the student loans entirely. This way it would allow me to could focus on the mortgage.
I went online and sent a payment online to my student loan provider for the payoff amount (which is different from the balance – it’s higher actually). After the payment is sent, I can say that I am freed from student loans.
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