Debt Reduction Tips

Consider the following debt management tips when looking to reduce debt and gain control of your finances.

Pay high interest rate credit cards first.  Organize your credit cards from highest interest rate to lowest interest rate.  While continuing to pay all of your creditors, put as much extra money on the one with the highest interest rate.  Once you pay off the card, add that payment amount as an extra payment toward the card with the second highest interest rate. Repeat as necessary.

Consolidate.  A consolidation loan at a lower interest rate may help you get out of debt faster and manage your debts.  Remember to cut up the credit cards so you aren't tempted to run up the balances again.

Negotiate with your creditors.  Contact your creditors and ask for lower interest rates on your credit cards.  If they value you as a customer, they may lower your interest rates to keep you as a customer.

Transfer higher interest rate credit cards to one with a lower rate.  Make sure the lower interest rate applies to balance transfers, and watch for fees.

Set a budget and stick to it.  Create a spending plan that allows you to reduce your debts.

Review your expenses and identify overspending.  See where you can cut back and eliminate unnecessary expenditures.

Only charge what you can afford to pay off each month.  Limit credit use to 15-20% of your monthly net income.

Use your savings and other assets to pay down debts.  Withdrawing savings from low interest accounts to settle high rate loans usually makes sense.  Don't completely deplete your savings account.  Seek professional advice before liquidating assets.

Seek help.  Advantage Credit Counseling has debt counseling services to help families develop workable monthly budgets, and, if appropriate, will suggest its special Debt Management Program.  Under this plan, creditors offer special incentives to clients who make a commitment to get out of debt.  Incentives include waiving late and over the limit fees and lowering interest rates.