Large Credit Card Debt – Pay Of Fast
When you have a large amount of credit card debt to pay off, it can be difficult to know how much money you need or where you should direct your funds.
The following is a guide on how to pay off debts on credit cards and how to create a budget that makes the most of your resources.
What can lead to large credit card debts?
Many people look at credit card debt as a sign of irresponsible spending. However, there are many situations that could cause your credit card debt to grow out of control without you actually doing anything wrong!
For example, what if you had an accident and needed to see multiple doctors? What if you were in an accident that wasn’t your fault? You could end up with large medical bills that wouldn’t be covered by health insurance.
Dealing with large credit card debt
First, figure out how much money you owe all your credit card companies combined. For this example, assume that number is $15,000.
Next, find out what interest rates each company charges for its current balance, as well as the monthly minimum payment.
In this case, assume one has an interest rate of 12% and a monthly payment requirement of $150. Now divide the total by 12 months, which equals $1250 every month.
Now that you have a monthly payment requirement of $1250, decide how much extra money you can put towards your debts each month. The more, the better.
Negotiate with creditors
If one cannot make any additional payments, it may be possible to negotiate with credit card companies for them to set lower minimums or interest rates.
Create a budget
Once you’ve decided how much extra cash will go towards your debt every month, create a budget and stick to it.
By putting all this extra money into savings instead of spending it on other things like clothing or dining out, you should be able to pay off credit cards in half the time. This is especially true if you combine these ideas with those described in “How to Free up Cash.”
Get a debt consolidation loan
Alternatively, one might consider taking out a loan with a lower interest rate than the credit card charge if this is an option. However, one must calculate all monthly payments, including those of the original debt and the new loan.
If you find yourself with extra money every month, consider putting it towards smaller debts first, so they are paid off more quickly and free up even more cash for larger debts.
In any case, it is important to have a plan for how to pay off credit card debt before starting. The first step should be determining how much it will cost each month to repay the loans; only after the amount has been calculated can other plans be made.
I’m sure I don’t need to say this, but don’t forget about your student loans! They might not take as big a bite out of your pay as credit card debt, but they can still be expensive!
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