The Smart Debt Reduction Plan for Beginners

If you are new to loans and credit cards, you might be overwhelmed with the debts that seem to be increasing every second. It is important to deal with your debts early on, before it becomes too huge for you undertake. Here are some smart moves that a beginner like you can do to jumpstart with your debt free life:

Account all your debts

The first thing you need to do is to survey the damage. It is important to account all your debts so that you will know how you owe. Write down all your debts. It could include mortgages, credit cards, car loans, home equity loans, charge cards, medical bills, personal loans and all other kind of loans that you have accrued. You should also include the interest and the minimum monthly payments for each debt. This way you will have a clear picture of how much do owe, and from that you can device smart ways to reduce debt.

Appeal to your creditor for a lower rate

Look at the list you have created. Select debts that have more than 12% interest rate.  Interest rate of more 12% is too much to pay if you are aiming for debt free life. You can appeal to your creditor for a lower rate by simply calling the customer service and ask for interest rate reduction. Most of the banks are amenable to lower the interest rate for customer that good credit record.  If the bank is hesitant to lower your interest rate despite of you good payment record, just mention that you received offers from other bank with lower interest rates. They would hate to lose a good paying customer to a competitor.

Transfer your balance

If banks with high interest rate refuse to lower their rate, it is a good time to take your business somewhere else. Do a research if transferring your balance from one bank to another will benefit you. Before you decide to transfer your balance, make sure that you understand all the fees involved and if the rate they offer is just promotional rate that last for certain months or it is fixed.

Resolve one debt a time

Choose one debt to tackle and stick with it until it is fully paid. You will probably be tempted to start with the one with highest interest rate, but it will motivate you better if you start with the smallest debt. This way to reduce debt will make you feel motivated and hopeful that you will eventually pay all your other debts.

Leave a Reply

Your email address will not be published. Required fields are marked *