5 Get-Out-Of-Debt-Steps To Financial Freedom
Is debt stressing you out? Having debt isn’t inherently a problem, but it can quickly become one if you’re living beyond your means or not working toward bringing your balances to zero. So if you find yourself stressed in debt, here are five get-out-of-debt steps to get you on the right track leaving that financial burden behind you.
Step 1: Confront it
Ignoring or denying your debt won’t make it go away. The first step to get-out-of-debt is to confront it, by gathering all of your most recent credit card and loan statements.
Step 2: Make a List
Having all of your statements in front of you, make a list of all your debts. Include the name of creditor, interest, balance, and minimum monthly payment. This will help you form a clearer understanding of your debt status and seeing which debt is weighing you down the most.
Step 3: Create a budget
If you don’t know where to begin, check out our 6 easy steps on how to make a budget. Having a budget provides a clear financial breakdown of your total monthly income, fixed expenses and variable expenses revealing your debt-to-income ratio (DTI). Having this information outlined in front of you, it’s much easier to determine how much money you have to put toward paying down debt, and deciding where adjustments need to be made.
Step 4: Lower Your Rates
Paying high interest rates on existing debt causes your debt to add up, and makes paying it off much more difficult. Therefore, try to lower your interest rates with these possible options:
Contact your card issuer and ask to lower your rates
Card issuers want to keep your business especially if you are a long-time customer. Therefore, it never hurts to politely ask if they are able to lower your rates pending your current card status and payment history.
Consider a balance transfer credit card
Many credit card issuers offer 0% introductory APRs to customers who transfer a balance over to their card from another, with minimal account balance transfer fees. Be sure to research all options and do your diligence reading the fine print carefully. If you proceed with a balance transfer credit card, refrain from running up new charges, and pay the balance off before the introductory APR period expires.
At MCCU our Visa® Platinum Card is a great option for cardholders who are looking to save on interest.
Once you have paid off your credit card debt, keep your spending in check, with our 7 smart ways to avoid credit card debt.
Look into a personal loan
Personal loans, sometimes referred to as debt consolidation loans is another great way to simplify debt. This option allows you to consolidate all of your loans into one monthly payment at a lower rate, depending upon your credit score. With a personal loan you lock yourself into a predictable monthly payment for easier budgeting, and are given a fixed term in which your debt will be paid off.
At MCCU our Personal loans could save you time and money. Not only do we offer great loan rates, we also offer a .25% interest rate discount when you have payments automatically deducted from an MCCU account.
Step 5: Plan your strategy and put it into action
Refer back to your budget in Step 3 and review your debt-to-income ratio. This will expose whether you have money left over to put toward debt, or if you are in the negative and need to make some changes. To reduce debt, is to increase the amount of money you have left over to pay down your debt. To increase this amount you can either earn more money or trim your expenses. Whether you decide to earn more or trim more, plan your strategy and put it into action putting any excess cash toward paying off debt. The more money you put toward debt, the quicker you will become debt free.
The information provided is general in nature and may not apply to your specific situation.