5 Ways To Reduce & Eliminate Debt 

5 Ways To Reduce & Eliminate Debt 

It’s very easy to get into debt, but painfully difficult to get back out. It can take just a few months to create tens of thousands of dollars in debt, but sometimes decades to pay it off. Everyone who pays off their debt does it a different way and often combine strategies to knock out bad debt. Below I have listed 5 ways that you can reduce and eliminate your debt.

1. Stop Creating More Debt

This alone won’t get you out of debt, but at least your debt won’t get worse. When you continue adding debt while you’re paying it off, you won’t make much progress, if you make any progress at all. Reduce your temptation to create more debt.

2. Increase Your Monthly Payment

If you’re only paying the minimum on your debts, it will take the longest time to get out of debt. By the time you finally pay off your balance with minimum payments, you’ll probably have paid double or even triple what you originally charged. It’s only ok to pay the minimum on your credit cards when you have a debt-repayment strategy that requires you to make a big payment on one of your credit cards.

3. Build an Emergency Fund

If you’re trying to get out of debt an emergency fund can actually keep you from creating more debt by providing you with a safety net you can use instead of a credit card when an emergency comes up. The ideal emergency fund is six to twelve months of living expenses, but focus on building up at least $1,000 in the short-term.

4. Pick One Debt and Give It All You’ve Got

Some people increase all their minimum payments by just a little bit, but that way your payments only drop by a small amount each month. You can make more noticeable progress by making a big payment to just one of your accounts each month until that debt is completely repaid. In the meantime, make the minimum on all your other accounts. Then do the same for another debt, and another until they’re all paid off.

 5. Ask Your Creditor for a Lower Interest Rate

Higher interest rates keep you in debt longer because so much of your payment goes toward the monthly interest charge and not toward your actual balance. Ask your credit card issuers to lower your interest rates. Often, customers with good payment history can negotiate lower rates.

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