You
can throw the reminders in the Cuisinart or chuck them into a garbage can, but
that won't make the debt go away. Debt hovers like a carrion bird over a dying
beast, costing you more than 18% compounded monthly, month in and month out. You
can't wish it away. But you can pay it down with determination, our free How To
Get Out of Debt online guide, and the good graces of a few wealthy relatives (see
tip No. 5). Here are nine ways to get out of debt:1.
Pay more than the minimum
First, break the habit of only paying the minimum
required each month. Paying the minimum -- usually 2% to 3% of the outstanding
balance -- only prolongs the agony. Besides, it's precisely what the banks want
you to do. The longer you take to repay the charges, the more interest they make,
and the less cash you have in your pocket. Don't play their selfish game. Instead,
bite the bullet and pay as much as you can each month. If your minimum payment
is $100, double that to $200 or more. Examine your normal expenses -- you can
find the money. (For a gazillion ideas, check out our Living Below Your Means
discussion board.) Skip eating out at lunch, and bring it from home instead. Eliminate
desserts. Give up happy hour. We all have "luxuries," and you know what
yours are. Make a few sacrifices, and you will find the extra
dollars needed to increase your debt repayments dramatically. Those increased
payments will save you hundreds, if not thousands, in interest payments. Plus,
you will get out of the hole you've dug for yourself much more quickly. Is it
fun? No. But it sure beats living a hand-to-mouth existence, fearing bills each
month. 2. Snowball your debt payments
Take a long, hard
look at all your credit cards. Pay particular attention to the one with the lowest
interest rate. Have you reached the maximum limit on that card? If not, consider
transferring a higher interest bill to that one. Many credit cards permit this,
and it's positively Foolish to trade an 18% debt for one at 12% at any time. If
your entire balance is too large to fit on one low-interest rate card, pay at
least the minimum amounts due on all of your cards except one. Funnel the majority
of your debt repayments into that one credit card, and pay it off as quickly as
possible. When the balance on that card reaches zero, move on to the next with
the same aggressive repayment plan. Lather, rinse, and repeat.
This method of snowballing your payments is aptly called "snowballing."
As your debts decrease, the amount of money you have to attack them increases.
Your payments snowball until all of your debt is pummeled. Pretty neat, eh? Another
way to transfer higher interest debt to a lower-interest card is to take advantage
of the promotional offers many banks use to entice you to their line of credit.
You've seen the come-ons. "Transfer all your credit card balances to us,
and pay just 5.9% until January 1, 2003." It could be worth it. Moving to
5.9% from 18% interest could mean substantial dollars to you. And the money saved
in interest could then be applied toward the principal each month, thus reducing
your outstanding debt balance even further. (For more on how to take advantage
of balance-transfer offers, head to step 2 of our free How To Get Out of Debt
online guide.) Take care, though, before you act. Examine
the offer closely. Look for the hooks. Will the interest rate after the introductory
period be higher than you're paying now? If so, you may have to switch again at
that time. That, in turn, could give rise to another surprise. Banks have caught
on to the charge card hoppers who switch from card to card to take advantage of
the low introductory rates. Many of these offers now stipulate that if you transfer
balances from the new card within a 12-month period, the normal interest rate
will be applied to all outstanding balances retroactively. That proviso could
be a bitter pill to swallow for someone short on cash, and it certainly doesn't
help the debt repayment schedule. Read the fine print, Fool. Article
continued at http://www.fool.com/ccc/debt/debt03.htm Home
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