As living costs seem to be rising ever faster in the struggling economy, the government isn’t the only thing getting deeper into debt. The average American now carries more personal debt than at any previous time in history. So what to do about it?
There are several options, and some steps comprise a suite of best practices. One of these options is debt consolidation for payday loans and credit cards. With this hand in hand, we’ll investigate a handful of other methods to get you out of the red and into the blue.
Debt Consolidation Works Wonders
The benefits of combining all of your bills into a single, lower interest payment are multi-fold. First of all, if you’ve been paying your outstanding bills on time, you’ve likely seen a rise in credit score, as well as a decrease in your debt-to-income ratio. These make you eligible for lower interest rates in all your borrowing endeavors – whether they be auto loans, mortgage or personal loans.
Furthermore, the loan you use to consolidate debt is viewed differently by creditors and leads to a lower FICO score all by itself. The reasons are a bit involved, but it’s definitely a benefit on the road to greater creditworthiness.
As a way to keep track of your FICO score (consistently, that is), many credit card companies such as Capital One and Barclaycard have free credit trackers when you sign up for an account. These are considered “soft checks”; in that th, y do not adversely affect your credit score. There’s a very convenient breakdown page linked to your account that details how various factors contribute to your overall score.
Transfer Your Credit Card Balance If Possible
Let’s face it: credit card companies are in competition like few other industries. They make and spend a bunch of money to corral your business and capture the ever-maturing legions of prospective users emerging from the high-school and college ranks.
As a result, it is quite common to see new credit card offers that will give you an APR of 0% for a year or more if you transfer your balance to them. That means you have anywhere from 12 months to 18 months (usually) to exclusively pay money towards the principal, with a reprieve on the interest.
Discipline: Use Found Money Towards Your Debt
If you get a raise at work, win a small sum in the local lottery or obtain some inheritance money, you need to have the discipline to use most of this to pay down your credit card debt. Sure, the tax refund might be attractive to spend on a big vacation; but if you’re serious about paying down your debt, you’ll use the money towards the latter.
Proactively Seek Lower Interest Rates
This is actually a step before transferring your credit card balance (usually). See if you can negotiate a lower interest rate with your current credit card supplier. If this sounds unlikely; rest assured – it actually happens a lot. Just think about what interest represents, after all: your creditworthiness. If you’ve been paying your bills on time regularly, then you are actually demonstrating that you’re good for the money. This reliability will only help you if you realize you; so make the call. Be careful, however, of unsolicited calls about lowering your interest rates; there has been a recent spate of scams involved with these.
Get a Side Job
This job should be exclusively for paying down your debt; as such, it doesn’t have to take more than a few hours of your time. In fact, with independent contractor jobs such as Uber and Lyft, you can make quite a bit of money this way and have your balance and credit score where you want them in no time flat.
For your convenience, PayPal allows you to have more than one account with them – two personal and one business account. In this way, your “credit card balance” cash can be compiled in an exclusive account, making it easy to keep track of the money to be used to pay down your debt. Alternatively, there are several Android and iOS apps the also streamline this process; they can be downloaded for free on your Smartphone or Tablet.
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