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Debt Management & Credit Card Debt - We've all Been there

Always wanted that new something?  Got to have the latest electronic do-dad, or keep up with the neighbors item?

I know how you feel and before I knew it we were so deep debt that we saw no way out.  Credit card bills were in the five digit areas, second mortgage on the house, etc.  A few years ago we looked into a way out and though I can't say we're now debt free as I write this, we are however making our way out of the misery with good debt management principles.

There are numerous ways to get out of debt.  There is always bankruptcy, but that should be an absolute last option as once you have done that you will for the next 7 - 10 years live with that mark on you credit scores and pay ridiculously high interest rates from then on, which will just re-add to your debt loads in the future.   What I would suggest are few of the following ideas.  They are simple but they work and they will cost you nothing more that a little time and a lot of effort.

Debt consolidation or low cost debt consolidation loans.  These can be handy tools to immediately increase your cash flow as long as you use this extra cash to pay down high interest rate debts.  Don't get caught in the snare of "oh, now I have more money to spend" routine and just continue on you merry way.  You'll be right back where you started and worse.

Credit card debt consolidation can be a great method to lower credit card debt but the key to this is a great credit rating.  You know those pesky credit card ads that show up in your mailbox almost everyday trying to give you "low or no interest" payments?  Take advantage of them.  I must caution you, read the fine print before using these.  Many have stiff penalties for being late or missing a payment.  The trick is simple.  Most of these cards offer a six month to one year or more of free or very low interest.  I just transfer all of my high interest debt onto these cards, and let them ride for a year.  Before the year is up, I look for the the next offers to come in and transfer the balance to the next card and off we go for the next year.  I have gone for 3 years now, interest free and its been nice for a change to watch the balances drop.  I also try to make sure we pay at least twice the minimum payment to speed the balances down.  We have gone from 18K in credit card debt to almost $4500 now in less than 3 years.  I never could have done that at previous interest rate levels. 

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To make Credit card debt consolidation work for you, cut up your old cards and if you do keep an extra for "true" emergencies, keep the minimum balance very low (like $500 to 1000) so your risk is low of going right back to where you started.  There are also some software packages out there to help with your debt reduction plans which you can research also.  The best method I found was to pay down the lowest balances with the highest interest rates first.  Then you can take the extra cash from that payment (which is now gone) and apply it on the next one on the list.  You can pay down your debt much quicker that way.

There are always debt consolidation services, bad credit debt consolidation, and student loan debt consolidation services to use but again, there are often hidden penalties for using them (damaged credit scores, fees, etc.) so research you options first.  You can get out of debt and there's no real magic to it, but it does take discipline and time.  You can do it!


Written by: WM8C, April 30th, 2006  Not for use without permission.

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