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by Christy Bieber | Published on Dec. 7, 2021
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These five steps could help you recover from a serious financial mistake with your credit cards.
Finding yourself deep in credit card debt can be a frightening experience. Thanks to the high interest rates and low minimum payments that credit card companies impose, it can take forever to dig your way out of debt. You could also end up spending a fortune covering interest charges, and it may be hard to make all your payments.
The good news is, there are ways to manage your credit card debt more effectively so you can pay it down ASAP and get back on track with using your money for accomplishing other financial goals. Here are a few techniques to try if you've gotten deeply into credit card debt and you want to fix the situation.
It's a lot easier to feel in control of your debt if you have a plan for paying it off. To make your plan:
When you have a plan of action to tackle your debt, you're more likely to be able to successfully repay your creditors in a timely manner. And having a plan means you'll feel more in charge when it comes to managing your financial future.
The high interest rates credit card companies charge makes it hard to pay off your credit card debt because a lot of your money is wasted paying interest.
Refinancing could fix that. If you refinance, you get a new loan and pay off the existing high interest debt. You could use a personal loan to consolidate debt, or use a balance transfer credit card and move multiple balances to it.
Getting rid of many small debts and ending up with one bigger one with a lower rate can make repayment a lot easier. You'll have only one monthly payment to make and won't have to decide what order to repay your debt in. You can also lower your total monthly payments and ensure more of each one goes to principal rather than interest.
Putting extra money toward credit card repayment can help you climb out of the hole faster. So, for a period of time, consider paying for only the necessities and fixed costs such as your mortgage, car loan, and groceries. Beyond that, put as much of your money as you can toward debt payoff.
By reworking your budget to focus on sending as much money as possible to your creditors, you can pay your balance down much more quickly than if you were just sending in smaller payments each month.
Working a part-time side gig could bring in some extra money to help supercharge your repayment efforts. Since this is money outside your regular earnings, you can use the entire amount to pay down your debt so you can repay your principal much faster.
Finally, you should talk to your creditors about your options if you're truly in over your head and can't afford to pay the minimums or don't feel like you'll ever be able to pay your full balance off.
Creditors may be willing to allow you to work out a repayment plan or settle debt for a lump sum payment that's less than what you currently owe. Taking this step of asking creditors for help can be hard because it can often damage your credit score. But if you are struggling a lot financially due to the amount of credit card debt you have, finding a way to pay back less may be your best and only choice.
Be sure to consider each of these five tips carefully and pick the one that's right for you given how much debt you have and how feasible it is to repay it within a reasonable time without jeopardizing other important goals.
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