A Guideline for Paying Off Debt
There is no doubt that paying off debt is a great accomplishment, and it helps to reduce our stress level as well as our debt load. Getting out from under that pile of bills is a great feeling, and it can help save plenty of money in future interest payments as well.
In addition, reducing or eliminating debt also helps to improve the consumer’s credit score, an important consideration for the future. The higher the credit score, the lower the interest will be on mortgages and other loans. An improved credit score is an important side benefit of any debt reduction plan. In addition, those with a debt free lifestyle have a great many options when it comes to saving money, spending money and saving for the future. It is easy to see why getting out of debt is so important.
Know where you stand
Before any consumer can get out of debt, he or she will have to first analyze current bills and living expenses. It is important to establish a monthly budget and to find out where money is leaking each month. Recapturing this “leaked” money is one of the most important considerations when getting out of debt.
It is also important to carefully examine the current balance and interest rate on each bill, and to add up essential living expenses. Once you have a clearer picture of the money coming in and the money going out you will be in a better position to do something about it.
Lower those interest rates
The purpose of the exercise with the balances and interest rates is to determine where the debt paying focus should lie. It is essential to prioritize payment of debt, starting with the highest interest rate debt. Many consumers are able to move high interest rate credit card debt to a card with a lower APR, and save significant money in doing so. If this is not an option, it is important to use all the extra money you can capture to eliminate those high interest debts. After all, getting rid of an 18% loan is the same as getting an 18% guaranteed return on your money.
Don’t be afraid to ask for help
Too many consumers wait until the situation is dire before seeking help with their finances. It is important to seek help from a qualified debt management company if you feel financially strapped. Debt management companies are quite skilled at helping consumers dig their way out of debt, but it is important to act before the situation becomes desperate.