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Smart Tips to Consolidate Debt

site management on September 13th, 2008

creditcard1 300x225 Smart Tips to Consolidate Debt image by squeakymarmot

Smart Tips to Consolidate Debt
By Steven Hakala

For years we have been living in a world in which when people want something and don’t have the money they charge it! Do you ever stop and think – how do my neighbor’s kids afford leather jackets and $100 sneakers when they make less money than I do? More than likely they are charging their purchases. I have worked in the mortgage business for years and have seen credit reports with credit debt ranging from $10,000 to $100,000. Imagine having $100,000 in credit card debt at 21% APR. Your home is your most important asset and consumers are leveraging the value in their homes to pay credit debt – and then running up debt again.

What is the answer – DISCIPLINE!! First you need to stop spending and then eliminate debt. Easier said than done!

Tip 1 Avoid leveraging your home, as this is your most valuable asset.

Tip 2 Get rid of high interest credit cards; i.e., department store cards. Destroy them and call the company and ask that the account be closed. Stop all new charges.

Tip 3 Shop for a credit card with no annual fees, a low APR, allows balance transfers and offers a credit line. Use the card for emergencies only or items that you can pay off monthly. You can consider transferring high interest balances to low interest cards. Always make more than the minimum payment.

Tip 4 Shop for a personal loan. You can consolidate debt on high interest credit cards at a lower, fixed rate personal loan. If possible pay extra toward the principal each month and pay your loan off sooner.

Tip 5 Use the pyramid approach. Organize your debt in order of smallest balances and highest rates. The gist is that you pay these off first and then apply the money you paid on the highest rated cards to the next highest interest rated account and continue until the debt is paid. It may make sense to take on a part time job until your debt is resolved.

Tip 6 Avoid using IRA or 401K loans to pay off debt. You will have to pay interest on these loans and if you do not pay them you incur a tax consequence.

Tip 7 Avoid filing bankruptcy. Exhaust all other avenues first. A bankruptcy will impair your ability to get loans for years to come.

Tip 8 Look at the various credit counseling and debt consolidation programs that are available. This is your next to last choice before filing bankruptcy. These programs can help you reduce or eliminate revolving debt and collection accounts. In many cases the accounts in counseling show on your credit report as being in credit counseling. Banks will be concerned about this. If you are in credit counseling be sure that you make all monthly payments on time as a lender may require a payment history from the credit counseling agency.

Tip 9 When your debt is resolved obtain a copy of your credit report. Obtain letters from creditors agreeing to remove collection accounts, late payments and other inaccuracies. Submit these letters to the three major credit bureaus and have your credit updated.

Think smart. Spend smart. If you don’t have the money then put your purchase on hold!

We invite you to visit http://www.turningpointfinancialservices.com to obtain additional information about our site and what we offer. We have a page dedicated to debt consolidation, credit repair and identity protection. You can also look at our personal loan sources as well as top credit card choices.

Article Source: http://EzineArticles.com/?expert=Steven_Hakala
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