People typically find themselves in debt as a result of spending more than they earn. And with the current economy, being in debt can have more immediate and long-term effects. Fortunately, getting out of debt is not all that difficult as long as you take the steps to do so and stick to the game-plan!
The first steps towards a life free of debt are some of the simplest. Reduce your discretionary expenses as much as you can. Discretionary expenses are costs that you do not need to survive, like going out to eat. Next, develop a budget and stick to it. Below are tips that will help you reduce some of the more common types of consumer debt.
Credit Card Debt
If you have ever been late on a credit card payment, you can expect your interest rates to rise to an interest rate as high as 32%. With interest rates this high, it can be difficult to satisfy anything more than the monthly minimum. Therefore, it is important that you pay your credit card obligations on time every month to avoid having to unnecessarily pay more.
But, if it's too late and you are already in a situation of paying ridiculous interest rates then you will need to develop a plan. The most sensible thing to do is to get rid of the credit card with the highest interest rate first. Pay the minimums on all the other cards while contributing as much as you can towards the highest interest card. Then, once the highest interest card is paid off, start battling the next highest interest card. Although this approach may take a year or two or more to resolve your debt, you need to start somewhere.
Another option for getting rid of high interest credit card debt is to utilize cards offering 0% balance transfers or low intro APRs. However, when going the route of balance transfers, make sure you read the new card's fine print so you understand the costs involved for the transfer. Typically, the average fee of a balance transfer is 3-4% of the amount being transferred.
Ideally you should attempt to pay your balance off before the introductory rate expires. However, if you are unable to, it is important to understand what the interest rate is going to be once the intro period expires. You don't want to be in a situation close to or worse than you are currently in.
If you find your mortgage payment becoming difficult to pay, get in touch with the lender and see if you are able to obtain a better rate or lower monthly payments. In the event that you are in a really urgent situation, find out if your lender partakes in the Hope for Homeowners program. Hope for Homeowners is a government run program that encourages lenders to refinance mortgages of borrowers that are at risk of losing their property. According to HUD (Department of Housing and Urban Development) there are currently more than 200 lenders participating in this program.
Private Student Loans
Many college students are finding themselves still paying down their private student loans years after graduating. Student loans have variable rates tied to them with average interest rates of 14%. Therefore, unless you get a high paying job right out of college, satisfying your loan obligations in addition to other debts as well as living expenses can be difficult.
Similar to the plan with credit card debt outlined above, you'll want to pay-off your student loans that have the highest interest rates first. Once the highest is paid off, concentrate on eliminating the next highest, and so on.
Debt as a result of unexpected medical costs can pile up very quickly. If you have insurance, make sure your provider is paying their entire share of costs. It is very common for doctors to use the wrong code when billing insurance companies. This will equate to your insurance company not paying out the right amount or even not paying at all. Therefore, contact your carrier and go over the bills to make sure the doctor input the correct info for the services/care provided.
You should also communicate with your doctor/s. If you are unable to make payment in full, they will likely work out a monthly payment schedule for you. But, prior to contacting your doctor, determine how much you will be able to commit every month towards doctor bills. You don't want to agree to an amount that you are not going to be able to afford. Let the doctor's billing department know what this amount is. Be honest though since they are trying to help you.
It is also common for hospitals to have access to government funds to assist patients that are unable to afford medical care. There are also non-profit organizations that also offer financial help for those in need of assistance paying medical bills.
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