Using Debt Consolidation To Get Relief
Debt consolidation is often the preferred choice for debt relief because of the benefits it provides. With consolidation, you pay back everything you owe while minimizing interest charges. You can often enjoy lower monthly payments, even while you pay off your debt faster and save thousands. Theres also no credit report damage, which you see with other solutions like debt settlement and bankruptcy.
There are three basic ways to consolidate credit card debt:
Make Extra Payments Using New Money
Cutting expenses can only go so far why not find new money to pay your debt?
Working an extra day on overtime every other week could bring in thousands of dollars annually. For more ideas, see my list of ways to make more money from your job, or try some of these ways to make money at home.
In general, any unexpected or extra income should go toward your debt including tax refunds or monetary gifts.
Then, sell everything you dont use on Craigslist or have a garage sale. Use the money you raise to pay down those balances.
How Long Will It Take To Pay Off Your Credit Card Debt
Ever feel like debt freedom is an impossible dream, something beyond reach?
Paying off your credit card can be a painful subject. But it doesn’t have to be that way.
Imagine if you could pay off your debt quickly. How much more money would you have for vacations, your children’s education, or retirement goals?
Thankfully, our Credit Card Payoff Calculator helps you easily figure when you’ll be able to pay off your debt. Try entering various payment plans and prove to yourself how much time and money you can save!
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Work Out What You Can Afford To Pay
If youre struggling to pay back money you owe, the first thing to do is to work out what you can actually afford to pay by doing a simple budget.;How to work out what you can afford to pay.
If you;can;afford to pay somethingStart paying the amount you can afford and get in touch with your;creditor;straight away to put a repayment agreement in place.
If you;cant;afford to pay anythingCall us on 1800 007 007 straight away for advice.
How Does Credit Card Interest Work
Typically, most purchases you make on your card will be free of interest charges for 56 days after the purchase, but if you havent paid them off in that period the interest charges are backdated. Some cards also offer specific 0% purchase periods that let you pay no interest for longer.
You can avoid paying interest on your balance by paying it off in full and before the end of the month. If you cant pay it off in full then your balance will accumulate interest charges.
If you fail to make a payment then its likely you will be charged interest and a penalty fee, and it will show up on your credit report, negatively affecting your credit score.
The more you can pay back each month, the less interest you will end up paying overall. The longer you take to pay off your balance, the more you will end up paying.
Interest is different from the Annual Percentage Rate , which factors in a number of costs, not just the rate on purchases, balance transfers, but also annual fees, if applicable.
The results from the credit card calculator are representative and not a guarantee of the exact interest you will end up paying.
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Are You Eligible For Tax Credits
Tax credits are state benefits that provide extra money to people responsible for children, disabled workers and other workers on lower incomes.
There are two types of tax credits child tax credits and working tax credits.;
Tax credits are tax-free and you don’t have to be paying National Insurance or tax to qualify, but they are means-tested. So, whether you qualify and how much you get depends on your household’s income and circumstances.
Find out more:;read our full guide to tax credits to find out if you qualify and how much you could get.;
The Fastest Way To Pay Off $10000 In Credit Card Debt
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
Digging out of thousands of dollars of credit card debt can feel frustrating, intimidating and ultimately impossible. Fortunately, it doesnt have to be any of those things if you learn how to take control.
Paying down debt is not only about finding the right financial tools, but also the right psychological ones.
To start, you need to understand why you racked up credit card debt in the first place. Perhaps it was a medical emergency or a home repair that needed to be taken care of immediately. Maybe youd already drained your emergency fund on one piece of bad luck when misfortune struck again. Or maybe youre struggling with a compulsive shopping problem, so paying down debt will likely result in you accumulating more until the addiction is addressed.
You also need to understand what debt payoff strategy will motivate you to succeed. Do you want to pay down your credit card debt in the absolute fastest amount of time possible that will save you the most money or do you want to make small wins along the way to keep yourself motivated?Here are a couple strategies to consider as you learn the best way to handle credit card debt and pay it off quickly.
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Make Two Payments Per Month
Most credit card companies use an average daily balance to compute interest charges.
Instead of paying $400 toward a balance each month, make two payments of $200. Youll lower the average daily balance so youll pay less interest!
In theory, paying every week would help even more, but may be too cumbersome.
How Can I Pay Less Interest
There are two main ways to pay less interest: pay more a month or transfer to a balance transfer card
Increasing your monthly payments will always be beneficial to your credit card debt as it will speed up how quickly you can pay your card off and therefore reduce the amount you pay in interest overall.
Crucially, however, it should be based on what you can afford. Theres no point paying off more of your credit card balance if it leaves you overdrawn at the end of the month, or missing bill payments.
Thats when balance transfer cards can be helpful. If your debt is significant and you’re struggling to increase your minimum payments you can shift the debt for a one-off fee. That then gives you a grace period, within which you can pay off your debt without worrying about interest payments. This grace period could be 12 months or more, giving you breathing room to get on top of your debt.
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Reject Increases In Your Credit Card Apr
If you withdraw cash from a cash machine with your credit card or pay off anything less than the full amount on your statement, you’ll normally be charged interest by the card company.
If your credit card company decides to increase your interest rate, it must contact you at least 30 days beforehand to give you time to decide what to do. You should be given 60 days to reject the hike, cancel the card and pay back what you owe at the old rate.
Find out more:;discover how credit card interest is calculated and how to find the best credit card deal that suits your circumstances.
Reclaim Money In A Forgotten Bank Account
There are billions of pounds lying unclaimed in dormant bank and building society accounts, investments, pensions and life insurance policies.
If you think you may have lost a bank or savings account then there are free tracing schemes to help you recover lost money. For investments, pensions and insurance policies you may have to pay a fee to search.
Find out more: finding lost accounts the simple steps you can take to re-trace your lost money online.
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Types Of Credit Cards
Different types of credit cards suit the needs of different types of spenders. For simplicity, it would be wise to find one that aligns best with the user’s financial intentions; for instance, a person who is not an extravagant spender and not interested in anything except getting the best bang for their buck can probably live with just a no-fee cash back card. However, it is very possible for people to carry multiple credit cards for their different advantages, even if it requires a bit of management. What’s important is that they are all paid off in a timely manner.
Cashback: These offer cashback on all purchases, usually 1%, 1.5%, or 2%. Another type may have up to 5% cashback on selected categories of merchandise or services, which normally rotate quarterly.
Rewards: These make up the bulk of most credit cards. The types of rewards usually range between airline miles, hotel bookings, and dining benefits. Credit cards that offer more rewards or miles will generally require annual fees, and it is up to each spender to evaluate their spending habits to decide whether a no- or low-fee card with low rewards is preferable to a high-fee card with high rewards.
How A Personal Loan Can Help You Repay Credit Card Debt For Less
A personal loan allows you to borrow a lump sum of money at a fixed interest rate and use it for just about any purpose. Then, you repay the personal loan over a fixed time frame. When you use a personal loan to consolidate or refinance credit card debt, youll ideally find a personal loan that offers better terms than on your current debt. For example, a personal loan can offer the following depending on your eligibility:
- Lower APR: The APR is a measure of your cost of borrowing and includes the interest rate plus other fees. APRs may start as low as 4.99% and reach 36% or higher, though youll need good or excellent credit to get the most competitive rates.
- Fixed repayment period: Personal loans have fixed terms, usually ranging from 12 to 60 months or longer. A shorter term would minimize your interest charges, but come with higher monthly payments. A longer term would do the opposite.
- Extra cash: You can apply for more money than you need to repay your existing debt. Lenders can offer $1,000 to $50,000 or more, depending on eligibility.
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If Youre Drowning In High Interest Rates
If youre committed to monthly payments but still drowning in credit card debt thanks to high interest rates, there are additional options. Both of these do not by any means erase debt, and also come with their own setbacks. They might, however, help you with high interest rates if either the snowball or avalanche method arent working fast enough.
See If You Can Get A Lower Interest Rate
If you cant pay more than the minimum on your card, see if you can find a balance transfer card that has a lower interest rate than the one youre currently paying, because a lower interest rate will help you pay less by the time its paid off. If you have several cards with high interest rates, a lower rate could even help you more than paying off your smallest balance first.
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Ways To Get Out Of Debt Once And For All
Getting rid of credit card debt can provide immense relief. Carrying debt is stressful, and high-interest-rate loans can put a strain on your finances. But its possible to pay off your credit card debtyou just need a solid plan.;
To help you tackle your balances, well cover how to build the foundation you need to eliminate your debt and share some tactics you can employ right now to succeed. Well also explain strategies that may be appropriate for people who are feeling financially strong, as well as a few techniques for people who are having a harder time. Lets get started.;
How To Calculate Interest Charges On Credit Cards
Average Daily Balance Method
The most widely used method credit card issuers use to calculate the monthly interest payment is the average daily balance, or the ADB method. Since months vary in length, credit card issuers use a daily periodic rate, or DPR, to calculate the interest charges. DPR is calculated by dividing the APR by 365, which is the number of days in a year.
|Daily Periodic Rate, DPR =;|
Then find the ADB. The equation for finding this is a bit more tedious, but just add up all the balances for each day in the statement billing cycle and divide by the total number of days in the billing cycle.
|+ + … +|
|number of days in the billing cycle|
Finally, multiply this by the Daily Periodic Rate calculated before it and the number of days in the billing cycle to determine the interest for that month’s statement.
Monthly interest payment = DPR × ADB × number of days in the billing cycle
Example: Jon needs help calculating the interest payment for one of his credit cards in the month of June. It carries an APR of 15%. Calculate his DPR using the equation above:
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How Long Does It Take To Get Out Of Debt
Theres no set one-size-fits all timeline for getting out of debt. Creating a budget and a debt payment plan for yourself will help you reach the finish line as fast as possible. Focusing on accomplishing one goal at time will also make the whole process seem much more manageable. Plus, if youre reading this, youve made a good start already!;
Use Pyramiding To Put Your Plan Into Action
Now, you need to put your plan into action. This involves something we call pyramiding.
Essentially, its about focusing all your money on one debt and then building upon minimum payments as you knock out balances one by one.
Your approach here will differ, depending on which debt destroyer method youve chosen.
- Debt Destroyer No. 1: Continue to pay the minimums on all your balances. Then, focus on the balance with the highest interest rate and apply all extra money to paying down that debt.
- Debt Destroyer No. 2: Again, continue to pay the minimums on all your balances. Then, focus on the smallest balance and apply all extra money to paying down that debt.
Keep repeating this process each month until you pay off a balance in full. At that point, take all the money you used to spend on that balance and apply it to the next balance on your list.
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Check For Old Direct Debits And Standing Orders
Its entirely possible youre paying for something that youve forgotten about such as an unused gym membership , insurance for something you no longer own, or a paid TV subscription.
Go back through a years worth of bank statements and identify any payments that dont look familiar. Once youve worked out what they were for, see if any can be cancelled and check your original contracts.
I Sold Unused Frequent Flyer Miles
On a related note, if youve collected a substantial amount of frequent flyer miles, there are websites that will buy them from you. Like anytime you sell something;to a third-party broker, you get far less than the miles are worth, but if youre in debt, cash is far more important than a few frequent flyer miles.
I will say that this is a somewhat sketchy move, as the airlines prohibit it. I didnt actually sell my miles; rather, I exchanged them for points that could be used for gift cards at places like Amazon. This site describes;how selling frequent flyer miles works .
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Next See If You Can Pay More Than The Minimum Payment
Many credit card issuers allow cardholders to carry a balance month-to-month and make minimum payments partly for the cardholders convenience, but also because it benefits the issuer to create a big interest charge. If you can, try to pay more than the minimum so you can lower your balance and pay less in interest over the life of the loan. A credit card payment calculator like this one can help you estimate how fast you can pay off debts if you pay more than the minimum each month.
Benefits Of A Balance Transfer
The purpose of a balance transfer is to help you pay off your debt. This means paying as little interest as possible. For example, if a card has an introductory rate of 0%, you have a chance to pay off your balance without accumulating more interest.
Balance transfers can also help you manage your payments. If you have balances on multiple credit cards, consolidating your debt onto one card means fewer payments to keep track of.
Paying your debt off faster can also boost your credit score. Balance transfers can help you reduce your overall debt, which also gives you more available credit on your card. Both outcomes are good for your credit score.
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