Many people have credit cards these days. Credit cards encourage people to spend recklessly too often, thus resulting in credit debt. If you are one of those who is struck with credit debt and are struggling to come out of it, then follow these tips. India’s First Free Online Financial Advisory, Moneymindz
1. Clear the highest rate of interest first
Whatever extra cash you might have must be invested into clearing the debt of the highest credit card. Once that’s taken care of, apply all your extra cash to the next highest rate card, and then the next and so on till your cards debt are all cleared. Other ways to eliminate credit debt would be trying to clear the debt of the card with the lowest balance and trying to clear the debt of the card with the highest utilization ratio.
2. Don’t use your credit cards
This is a no-brainer. If you want to tackle credit debt, first limit your credit card usage and concentrate on paying the debt. Using it more will only create more debt and make it difficult for you later on. So always pay in cash and start planning on how to get the credit debt cleared. India’s First Free On call Financial Advisory, Moneymindz
3. Be systematic and set up a budget
Make a note of how much debt you owe and how you would clear it all. How many cards do you have and how much debt do you have on each card? If you don’t know what the problem is, you don’t know how to deal with it and what has to be done. Then establish a budget. A budget consists of your monthly income, expenses, savings, investments, insurance, financial goals and time frame. See where all you can squeeze in surplus money to clear the credit debt.
4. Negotiate for a lower interest rate
Talk to the credit card company and explain your situation. Together, work out a plan and try reducing the interest rate. A lower rate means lower monthly payments and fees so you don’t have to pay more money each month. Negotiate with the company and arrive at a conclusion. Smart Financial Advisor, Kuber Mindz
5. Try if you can take another loan to clear credit debt
This isn’t something you have to try first. But if nothing else works, try borrowing money from a bank or financial institution and clear all your credit debt. Then focus on clearing the single debt. This method won’t make you debt-free but will at least clear your credit debt.
6. Don’t close the card after clearing the loan
Your credit score is based partly on your credit utilization ratio, which is calculated based on the amount of credit you are using versus the total amount of credit in your name. Closing it means less credit in your name. So keep the card but use it wisely.
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