Tips to Clean Up Your Credit Card Debt – Before Applying For A Loan
Don’t throw up your hands or give up, thinking you’ll be in credit card debt forever. You do not have to be, and you won’t if you establish realistic expectations and a timeline that is not so stringent you cannot achieve the goal.
1. Commitment to Paying More Than the Minimum
Credit card companies will put the amount of time it will take you to pay off your credit card if you pay the minimum balance. For example, if you owe $3,000 on a credit card with an interest rate of 17 percent and pay the minimum 3 percent payment of $25, you will pay off your debt in 126 months, which is more than 10 years. But if you paid off even an extra $20 to $25 each month, you could cut that time nearly in half.
A small amount can make a big difference. By committing to paying what you can, even if it’s an extra $15 to $25, can cut your credit card costs and make you feel as if you are working toward something: Freedom from credit card debt.
2. Focus on Small Victories
Two schools of thought exist regarding the best way to pay off credit card debt. School one is to pay off the card with the highest interest rate, so you do not lose as much money in interest. The other, second option is to pay off the credit card with the lowest balance first. The benefits of this approach are two-fold. First, you have a credit card you have successfully paid off. This boosts your confidence to pay off additional credit card debt. Secondly, you are then able to use the money you were paying for the low-balance credit card toward your remaining credit card. By keeping the momentum going, you can and will pay off the credit card debt completely.
3. Talk to Someone
Talking to someone can mean picking up your phone and calling your credit card company to request a lower interest rate. By reducing your interest rate, you could cut back on the money you pay over time as you work to reduce your credit card debt.
Another call you could make could be to a non-profit credit-counseling agency. Examples include the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Sometimes you need an outside, unbiased perspective of your finances to determine how you can pay off your credit card debt. If your approaches do not seem to be working, these agencies can help you pinpoint a new, more effective approach.
4. Stop Using Your Cards
You cannot move forward if you are constantly falling backward. This means breaking free from using your credit cards in the future. Whether you have to give them to a loved one for safekeeping, put them in a safety deposit box or freeze them in a block of ice. Whatever your approach, make a plan for how you will live life without credit cards and execute it. Once you feel secure you can live without charging, make your cards difficult if not impossible to get to or reserve just one card for emergencies.
Call if you have questions regarding your credit before you apply for a loan.
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