Reducing large debts can seem a daunting proposition, but with a little forward planning and prioritising it is possible to save considerable amounts. There are many ways to effectively reduce debt without resorting to debt consolidation companies.
When tackling the problem of reducing debt it is vital to know exactly how much is owed to which creditors and the different rates of interest. The most efficient way to reduce debt is to pay off high interest debts first.
How to Reduce Credit Card Debt
Many people owe money on more than one credit card. If this is the case it is important to prioritise which card the largest amount of money is sent to each month. By paying off the highest interest credit cards first the process of clearing debt is accelerated while interest charges are minimised.
It is vital to communicate with any creditors, including credit card companies. Most companies are happy to discuss alternative ways of reducing debt and may offer alternative repayment plans to suit particular financial situations.
Reducing Car Finance Debt
Shop around for competitive loan rates and consider paying off the remaining balance of a car loan at a lower rate of interest. When buying a car dealers may give the impression that finance has to be taken out with them, but this is not always the case. Do not be afraid to contact alternative finance companies and to negotiate with the dealer for a better rate of interest.
Reducing Mortgage Debt
For most people a mortgage is the largest debt they will ever have. Arranging a mortgage where additional payments can be made (assuming extra funds are available) allows homeowners the opportunity to pay off the debt sooner. Renting out an unused room in the house to a lodger can bring in considerable extra income, which can then be put towards further reducing debts.
Ways to Reduce Household Bills
Reducing monthly outgoings is a great way of freeing up more money to tackle outstanding debts. Simple measures can go a long way to cutting bills. Normal light bulbs can be replaced with more efficient energy saving examples. Ensuring a home is properly insulated means that heating will be required less often and at a lower setting.
Debt Helplines and Charities
There are many organisations and charities which specialise in debt reduction advice. They often have a debt help line which anyone can phone for free advice. An example of this is the National Debt Helpline in the UK. An internet search for debt helpline numbers will return a large selection of results. Likewise, debt help charities are also well represented on the web.
The main aim when reducing debt should be to pay what is owed in the shortest time, while minimising interest charges. Debt consolidation is an attractive proposition for many people, but is best used as a last resort. Although monthly payments will be greatly reduced by a debt consolidation company and they will offer an attractive interest rate the total amount repayable will usually be considerably more, stretched over a much longer period of time. Before embarking on any debt reduction plan it is advisable to consult a qualified financial advisor.