Cut Existing Loan Costs
It may be possible to swap your personal loan to a provider that charges a lower rate of interest although youll need to crunch the numbers to see if its worth it.
Youll have to call your existing lender and ask it for a settlement figure which will be the total of the debt still owed plus a settlement charge for paying it off early.
Youll then need to compare this figure to the interest rate on the best new loan you may be able to get, and see if the saving stacks up.
See If Youre Eligible For Mortgage Interest Support
If youre on certain benefits such as universal credit or pension credit, you may be eligible to apply for government help to pay your mortgage interest.
The government will pay the interest on up to £200,000 of your mortgage, direct to your mortgage lender. However, they wont make capital repayments. But bear in mind the loan needs to be paid back from equity in your house when you come to sell.
Find out more: to check if you might be eligible and to find out how to apply, Money Helper has a useful guide on the Support for Mortgage Interest Scheme.
How To Pay Off Credit Card Debt
Editorial Note: This content is based solely on the author’s opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
If you have credit card debt, you are not alone. There is more than $1 trillion of outstanding credit card debt in the U.S.
With some credit card interest rates ranging from 10-25%, the interest costs alone can become crushing. The best way to pay off credit card debt is with a personal loan.
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I Filed For Unemployment
A couple of weeks later, the pandemic hit hard, and NYC shut down to slow the spread of COVID-19. Sadly, that meant my farmers market job didnt exist anymore. On top of that, my primary employer slashed my hours substantially.
At that point, it seemed like my financial plans for the year would have to wait. But a friend said I might qualify for partial unemployment assistance. Then I learned that the CARES Act, which was signed into law later that month, meant I qualified for an extra $600 per week. I filed a claim and my monthly income went from about $1,700 a month to roughly $3,400.
Turn To Your Other Savings Goals
Once your debt, retirement savings, and financial safety net are in a strong position, it might be time to start turning your efforts to your other goals, whether saving and investing for a child’s college education, planning for the trip of a lifetime, paying off other remaining debts, or something else.
What goals you have, and which you choose to fund first, may be personal to you, so there aren’t necessarily any hard and fast rules for how to best focus your efforts.
If you aren’t already working with a financial professional, this might be a time to consider bringing in some help. A professional may be able to help you identify and prioritize your goals, plus come up with a saving and investing strategy that can put you on track to reach them.
It will still be up to you to do the hard work of funding your goals, but it never hurts to get some outside reassurance that you’re on the right track.
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When Youre Paying Down Credit Card Debt You Need A Plan Of Action These Six Debt Payoff Strategies Will Help You Get The Job Done
If youre wondering how to pay off credit card debt, these 6 tried-and-true strategies can help you pay down your balances and become debt-free.
Paying off credit card debt may feel impossible, but it can be done. With a well-thought-out plan and strategy in place, you can make consistent progress toward paying down your balances until you eventually become debt-free.
Heres a look at six tried-and-true strategies to help you pay down your credit card debt, as well as some tips for avoiding credit card debt in the future.
A debt consolidation loan can be a great way to pay down and eliminate credit card balances. Visit Credible to see your prequalified personal loan rates from various lenders in minutes.
I Set A New Money Goal
My hours were still reduced, so I continued receiving assistance from the CARES Act. That meant I still had a surplus of cash coming in. So I decided that building up an emergency fund was a good next step in my financial wellness journey. I didnt have a specific savings goal in mind, so I put all the extra money after rent, utilities, and other needs into savings.
Also, because of my salary, I received a $1,200 stimulus check in May. But because of my saving strategy and unemployment income, I never had to use it. By July 15, I stocked away $5,500 into my emergency fund.
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Should You Use A Credit Card Loan To Consolidate Credit Card Debt
If you have credit card debt and want to lower your monthly payment and interest rate, then you should consider a credit card loan to consolidate credit card debt.
A credit card loan enables you to consolidate credit card debt and combine your existing credit card debt into one credit card consolidation loan, which has one monthly payment.
With a credit card consolidation loan, you may be able to obtain a credit card loan at a lower interest rate than your existing credit card interest rate. With the best personal loans, there are no origination fees and no prepayment penalties, which means you can save on fees and pay off your credit card loan faster.
With the help of technology, you can learn your new, personalized rate within minutes. Plus, technology has lowered the fees for a personal loan, which means more money in your pocket and less in theirs.
What Makes A Good Credit Score
Naturally, it is important to understand how you can improve your credit score. At a fundamental level, this simply involves being responsible with your money. Pay all your EMIs and credit card debts on time and do not default on any agreement.
A more targeted approach to improve your credit scores within 6-12 month increments may include:
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Fully Fund Your Emergency Savings
Next up: Your rainy-day fund, aka your emergency savings. For this step, you should aim to save at least 3 to 6 months’ worth of essential expenses, and keep those savings in cash so you could access them easily if you ever needed to.
Although it might feel like a lot to keep in cash, remember that this money is your safety net, protecting you from having to fall back on credit cards if a job loss, medical emergency, or other life curveball were to come up.
Get Your Spending Under Control
Sometimes people get into credit card debt due to unexpected medical or emergency expenses. Other times, the source of debt is chronic overspending, which often means youre spending more than youre saving or more than you have in your account. To gain full insight into how much youre spending, making a reasonable budget is the next best step toward alleviating that debt.
Matt Kelly, owner of Momentum: Personal Finance Coaching in Durango, Colorado, recommends that your budget account for the following:
- Basic necessities: rent/mortgage, utilities, groceries and gasoline
- Obligations: minimum payments on credit cards and other debt
- Nice-to-haves: restaurants, coffee and entertainment costs
- Irregular recurring expenses: insurance, car repairs, tires, haircuts, vitamins, toiletries, vet bills, holiday gifts, travel, weddings and gifts
Its the last category that often trips people up and becomes the source of credit card debt, Kelly says. These little and not-so-little expenses go onto the card and are hard to pay off.
Once youve put your expenses down on paper or entered them into a spreadsheet, go through each item and find ways to free up enough money each month to pay off all your debts in 12 to 18 months, he says.
- Who this strategy is good for: Anyone lacking a sufficient budget
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How Would You Describe Your Current Financial Situation
Personally, I had to go through a dramatic experience in my life late 2016 to finally realize and make a decision to financially come to sense and free myself from debt. Also, to vow to never again put myself in this financial situation ever again!
With the beginning of 2017, I made a financial decision to save 45% of my monthly income by spending less and any other additional income .
I had created 4 bank accounts and I paid myself before I paid off my monthly expenses which method allowed me to live within my needs and not over spend. I only spend what I had in my spending account.
My four accounts how I made it work:
The reason I created these 4 accounts:
Long-Term Savings Account I wanted to have an emergency fund and an account I can build over time and not worry about taking money out for any reason.
Business Account Number 2 of my 2017 resolutions was to:
1) Invest in an organization or company I felt was bringing meaningful resources to people and
2) Purchase my first income property and start earning passive income. In order to do so, I created an LLC and Business Account and started to save.
Short-Term Saving Account Even though I was paying more than the minimum monthly payments on my credit card I had this account just for that reason and for any major expenses in the near future ex. Student loans.
Who Uses Your Credit Score
Whenever you make a financial transaction, check for a line of credit, open a new account, etc., your bank passes that data on to CIBIL, which maintains and compiles it in your CIBIL report. If you decide to apply for a loan, the creditor will file an inquiry for your report which will give them your credit score and dictate what terms they can offer you.
The 300-900 range can be formalised into five brackets for convenience: 300-600 , 600-649 , 650-699 , 700-749 , 750-900 .
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Best For Those Whose Debt Has Become Unmanageable
Seeking debt relief involves hiring a third party to negotiate with your creditors on your behalf. Debt relief typically comes in one of three forms: a debt management plan, debt settlement, or bankruptcy. With these methods, the third party can help you negotiate repayment, which may be less than the total amount that you owe in some cases.
Be Aware Of Minimum Credit Card Repayments
The minimum repayment is the least you must pay back on your credit card each month to avoid a penalty. Of course, if you only ever pay the minimum itll take you far longer and cost you more to pay back what you owe.
Its not always a bad thing to pay the minimum, especially if youre struggling for cash in a particular month. However, if you make it a habit youll struggle to escape the debt trap.
If you only make the minimum payment on your credit card, not only could it take you years to repay the full balance but you may also be damaging your credit score as lenders may view this as you struggling to repay your debt.
You can use our to work out how changing your monthly repayments can impact how long it takes to pay back your credit card debt.
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How To Lower Interest Rate On Credit Cards
Modified date: Oct. 27, 2022
If youre struggling with credit card debt, youre not alone. In fact, according to a report from the Federal Reserve, the average American household owes more than $7,000 in credit card debt.
And with interest rates on credit cards averaging around 15%, that debt can be difficult to pay off. But there are ways to lower your interest rate and get out of debt faster.
How To Pay Off Credit Card Debt Fast
I would suggest creating a personal budget you could do weekly, bi-weekly or monthly. At the moment I am doing monthly having all of my finance in one centralized place from income, expenses, investments, daily spending you will start to see where all your money is going and what to focus on the following month.
I use Personal Capital to track where all of my money is going to the last penny its free and works wonders for budgeting.
You can see how much you can contribute to your student loans/consumer debt every month and you can tweak your contribution until that debt is paid off. Its really useful and you can learn more in this Personal Capital review.
Another way to get help with paying off credit card debt fast with by using the best debt management apps. These are mobile apps that help you get out of the red and provide innovative ways to get out of debt fast. After all, the goal is to make your debt disappear as quickly as possible.
So here are some steps on how to pay off debt thatll work for just about anyone.
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How To Pay Off $5000 In Credit Card Debt Quickly
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There’s no one-size-fits-all answer to debt repayment. But here are some tips on how to pay off credit card debt you can follow.
In case youre new around these parts, The Meet Millennials Series features Millennials personal stories with money. Growing up I was raised thinking that talking about money was considered taboo. Im here to change that. Learning about our peers real, raw, stories can provide inspiration, purpose, and you can learn what to do, and what not to do, from somebody elses experience.
I received a submission from Johnson Joseph recently. He told me his story about how being too nice and not knowing how to say no got him into financial debt. Also, how he made a plan of action to pay off over $5,000 of credit card debt in 9 months.
It is the story of how a young man paid off $5,000 in credit card debt in 9 months and actually saved up close to a year worth of living expenses and a new business account with a half year goal almost met.
How did he pay off $5,000 credit card debt in 9 months? Lets find out!
In this article
Balance Transfer Credit Card
A balance transfer can help expedite paying off your debt by offering a promotional introductory 0% APR for a set amount of time, typically between six months to nearly two years. The way it works is you can transfer your high-interest debt to this card and continue making monthly payments. Since all of your payments will go solely towards the principal during the length of the offer, youll make faster headway than if you had to pay interest and principal.
One caveat is that these cards usually require a high credit score. If your credit isnt great it might not be an available option. Also be aware that most balance transfer cards charge a balance transfer fee, which is typically between 3% to 5% of the amount being transferred and can add to your existing debt load.
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Open A Balance Transfer Card
Similar to a debt consolidation loan, you can use a balance transfer card to consolidate multiple sources of credit card debt. The key to making the most of a balance transfer card is to look for a card thatll offer you a 0% introductory APR. During that period you wont have to pay any interest, which can make it easier to pay off your debt faster.
But youll typically need good credit to qualify for a balance transfer card with a 0% APR offer. And if youre still carrying a balance when the promotional period ends, youll start accruing interest at the cards regular rate, which can be high.
Good for: People who can afford to pay off the balance in full before the introductory APR period ends
Dealing With High Interest Rates
- Apply for credit cards with lower interest rates and transfer the balances of the high interest rate cards over. Be sure to read and understand the interest rates for balance transfers, fees, and other terms that may apply.
- Most credit card issuers calculate interest based on the average daily balance, not the balance at the end of the month. The earlier or more that is paid towards a credit card balance, the lower the average daily balance. This means that although most people usually pay once a month at the end of the month, they can save on interest through multiple payments a month, such as every two weeks or even every week.
- Apply for loans with relatively low interest rates and use them to pay off credit cards with higher rates. Taking out a line of credit on your home, refinancing your home, or seeking out personal loans are good alternatives. Be sure to understand the fees and costs pertaining to loans. Use our Personal Loan Calculator to estimate the real APR of the loan, which should be at least a few points lower than the credit card interest rate for this strategy to work.
- Contact credit card companies to try to negotiate lower interest rates or balances. Most of the time, this won’t work until a person has stopped making monthly payments, which is generally not recommended due to its negative impact on other areas of personal finance.
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