Want to Get Out of Debt? Stop Digging the Hole!

One of the most difficult aspects of getting out of debt is to stop digging the hole.

It’s a nice thought that you are going to put so much toward your credit cards each month, but it doesn’t matter how much you are paying down on one card if you are racking up debt on another card.

Even worse is when you get a balance transfer and then start building a new balance on your recently freed-up card.  It kind of defeats the purpose really and puts you in a dangerous place if you got a low-interest transfer and the introductory period is ending.

If you are really serious about getting out of debt, you need to stop digging in the hole.

Stop Debt Spending

The first thing that you need to do if you want to be successful at getting out of debt is to stop your debt spending.

Take an honest look at your finances.  Have you been spending beyond your means?  Even if you only exceed your income by $10 a month, that’s an issue.  Yes, even $10, in this case, is putting you in debt and odds are that debt is accruing interest putting you deeper in debt.  You need to first identify where you are living beyond your means — and stop that spending.

Start out by listing all of your expenditures.

[Read more…]

The Debt Avalanche: A Better Way to Pay Off Debt?

The popularity of Dave Ramsey’s “debt snowball” method of debt reduction has led to a number of related debt reduction strategies related to winter precipitation, from snowflaking to the debt avalanche.

Some think that the debt avalanche is a better way to go, because it looks at the math involved in paying of credit card debt (and other debt), and helps you pay less overall — and get out of debt faster.

What is the Debt Avalanche?

The debt avalanche is, in reality, pretty much the same thing as the debt snowball.

The only difference is that with the debt snowball, you pay off your lowest balance first, and with the debt avalanche you start with your highest interest debt.

With the debt snowball, you might keep paying higher interest on your debt, because you are starting with your lowest balance.  When that higher interest is on a higher debt balance, it means that you pay more in interest over time, since your interest charges accumulate faster.
[Read more…]

Debt Snowflaking: Using Small Amounts to Reduce Your Debt Faster

snowflake

When it comes to savvy credit card use, it’s vital that you avoid racking up large amounts of debt.

Unfortunately, many of us fail to track our spending, and before we know it, we’re drowning in credit card debt.

Getting out of debt can be challenging, even to the most competent of us.  However, it’s possible to boost your pay off efforts with a process called debt snowflaking.

What is Debt Snowflaking?

[Read more…]

Could a P2P Loan Help You Pay Off Your Credit Card Debt?

shaking_hands

One of the most difficult things to deal with is credit card debt.

Let’s face it, when you have a lot of credit card debt it feels like a huge weight on your shoulders that pulls you down.  I’ve been there.  I know what it feels like when your paycheck comes in and a good portion goes back out in credit card payments that barely put a dent in your total credit card debt.

When you have a lot of credit card debt, getting rid of it is hard because you dealing with high interest rates.  A good portion of your payment every month goes toward interest, rather than reducing your principal.

This problem is compounded when you have multiple credit cards with high balances.  You are paying different interest amounts on different cards, and it can really slow your progress.

In some cases, you can help your situation with a debt consolidation loan, in which a larger loan is used to pay off several smaller loans.  The problem is that it is hard to find an unsecured loan that will pay off all of your credit card debt if you go to a more traditional bank.  Banks have been real tight with credit and they aren’t quick to give out a loan to pay off another debt without there being something to secure your loan.

A balance transfer to another credit card could be an option but only if your credit is good enough to get a low interest rate and a credit limit large enough for the transfer.  Besides, if you’re still working on building good credit card habits then opening a new credit card may not be a great idea.

So what can you do to help pay off credit card debt?

Instead of relying on a more traditional bank, or putting your home at risk through a secured home equity loan, it’s possible to see if you qualify for an unsecured loan through P2P lending.

What is P2P Lending?

[Read more…]

Should You Consolidate Your Credit Card Debt?

pile_of_credit_cards

One of the most demoralizing things in life is credit card debt.

Credit cards can be useful in helping you manage your cash flow, as well as help you build a credit history.

The flip side, though, is debt.

Credit cards can come with high interest rates, and paying them down can become a difficult exercise — and even seem futile.  Without a solid plan, and way to ease the transition, paying off your credit card debt is beyond challenging.

One way to get moving with credit card debt pay down is to consolidate your credit card debt.

How Debt Consolidation Helps

[Read more…]

How to Use the Debt Snowball to Pay Off Credit Card Debt

debt_snowball

Having a great deal of debt can, indeed, be depressing.

Credit card debt is expensive, and it seems to be paid down at a rather slow rate.  Because of the high interest charged, if you are only paying the minimum balance, it can take years to pay off your credit card — and you could end up repaying an amount several times what you originally borrowed.

One way to feel as though you are making better progress with paying down your debt is to employ the debt snowball method popularized by Dave Ramsey. The debt snowball is a way of systematically paying down your credit card debt, while remaining enthusiastic about the process.

How to Use the Debt Snowball to Pay Off Credit Card Debt

Step 1: Order Your Credit Card Debts

[Read more…]

Tackling Debt: Start with the Credit Cards

When it comes to tackling debt, it can be difficult to decide what you should tackle first.

The good news is that it doesn’t have to be a tough choice.

Start with the credit cards, and you are likely to see good results. This is because credit cards generally have high interest rates.  If you start with your credit cards, you are more likely to get rid of the highest rate debt first, and let you concentrate on other debt later.

Paying Down High Interest Debt

[Read more…]