Can you really get your level of debt under control by using debt reduction loans? Sometimes called debt consolidation loans, the object of debt reduction loans is to help you reduce your monthly repayments to a more comfortable level that can help you to regain control of your finances.
How Do Debt Reduction Loans Work?
If you have credit cards, store cards, payday loans or other unsecured debts, then you?ll know how scary some of the interest rates being charged on your balances can be. Rolling your balances over to a debt reduction loan can mean you?re paying much less interest on the money you owe, which can significantly reduce your monthly repayments.
You may also have noticed that the minimum payments due on your credit cards and other consumer debts barely cover the interest charged. With debt reduction loans, the repayments are calculated to be principal-and-interest payments. This means a portion of each repayment is allocated to pay the interest due, but the other portion of your payment directly reduces your balance.
This gives you the opportunity to reduce the amount you owe very quickly and get out of debt for good.
Can Debt Reduction Loans Get You Out of Debt?
If you?ve managed to consolidate your unsecured debts over to a debt reduction loan then you should already be saving money on your monthly repayments. By putting some of those savings towards paying extra amounts off your debt, you really can reduce your balance quickly and finally get rid of those debts once and for all.
Unfortunately there are many people who use those cash savings to pay for daily expenses, so the consolidation loan gets relegated to a lower priority and people begin making only minimum payments on the new loan.
What Can Go Wrong with Debt Reduction Loans?
Far too many people apply for debt reduction loans believing they?ll be miraculously able to become debt free as soon as the new loan takes effect. What they forget is that they often have lifestyle expenses and spending habits that got them into financial difficulties in the first place. A debt reduction loan is only effective if you take the effort to mend the spending leaks in your budget so you won?t get back into the same situation again.
Once your credit cards might have been rolled into the new consolidation loan how will you pay your upcoming bills? Will you have enough cash left over from your current income to resist the temptation to go out and apply for a new credit card at the first sign of financial trouble?
There is a large percentage of people who take out debt reduction loans, only to find that they have at least one new credit card in six months time. Not only do they have a consolidation loan balance to pay off, but they also carry a credit card balance that needs to be paid off too. This puts them back at square one and in more debt than before they started.
While debt reduction loans can be a great way to regain control of your finances, if you?re not careful they could also be a way to get you into even deeper financial trouble than you were in before you started.
Ruthsella Corasol is the Owner of http://WorkingAtHome101.com. Check us out anytime for marketing tips and a free subscription to our cutting edge newsletter.
Thursday, October 18, 2012
Tuesday, October 16, 2012
Debt Reduction Plans - Can Make You Are Break You
There are almost as many debt reduction plans as there are ways to get into debt in the first place. So which one is the right one for you? There is no point working on a debt reduction plan that worked for a friend or family member, because their financial situation is not the same as yours.
What matters is that you find the right debt reduction plans to suit your income, your debt and your financial situation. It must be right for your unique circumstances.
You might decide to use the snowball method, or aim at paying off the highest interest debts first. You could choose to try debt consolidation or even debt settlement options to try and get rid of your debts.
Regardless of the type of debt reduction plans you choose, there are some things that hold true for all of them. In order to reduce your debt and get back in control of your finances then here are some things you will need to consider.
No More Debt
When you?re working on debt reduction plans it?s important not to incur any more debt. This means not charging anything else to your credit cards and not applying for new credit anywhere. You?re trying to reduce debt, not trick yourself into thinking just one more card won?t matter. It will.
Declining Payments
You might have noticed that the minimum repayment amounts on most credit card bills are different each month. This is because you?re charged interest on the balance owing. As your balance reduces, your payments should reduce too.
If you have any accounts with declining payments, then ignore the amounts as they change. Keep paying the same amount you were paying when your balance was high and you?ll pay it off much faster.
More Than Minimum Payments
Never pay just the minimum payment on your accounts. In order to make debt reduction plans work for you and get out of debt for good, you?ll need to find a way to pay more than just the minimum payment due each month.
If you?ve chosen the snowball method as your way of getting out of debt, then you?ll only be making excess payments on one debt at a time. As long as there?s extra money going on at least one of your debts, you?re making progress.
Motivation
The biggest problem with most debt reduction plans is that people lose motivation very quickly and fall back into their bad spending habits that got them into trouble in the first place. Find ways to keep your motivation levels high.
You might choose to use a debt reduction spreadsheet to track your progress. Or you might plan a really nice reward for yourself once your debts are gone. Think about how much money you spend each month on repayments. If all those repayments were gone, what would you prefer to spend that money on?
You might treat yourself by having enough money to save for a luxury vacation, or you might find there?s enough left over to save for a down payment on your own home. If you already have a mortgage, you could project your debt reduction plans onto paying this debt down next and work on being completely debt free.
Ruthsella Corasol is the Owner of http://WorkingAtHome101.com. Check us out anytime for marketing tips and a free subscription to our cutting edge newsletter.
What matters is that you find the right debt reduction plans to suit your income, your debt and your financial situation. It must be right for your unique circumstances.
You might decide to use the snowball method, or aim at paying off the highest interest debts first. You could choose to try debt consolidation or even debt settlement options to try and get rid of your debts.
Regardless of the type of debt reduction plans you choose, there are some things that hold true for all of them. In order to reduce your debt and get back in control of your finances then here are some things you will need to consider.
No More Debt
When you?re working on debt reduction plans it?s important not to incur any more debt. This means not charging anything else to your credit cards and not applying for new credit anywhere. You?re trying to reduce debt, not trick yourself into thinking just one more card won?t matter. It will.
Declining Payments
You might have noticed that the minimum repayment amounts on most credit card bills are different each month. This is because you?re charged interest on the balance owing. As your balance reduces, your payments should reduce too.
If you have any accounts with declining payments, then ignore the amounts as they change. Keep paying the same amount you were paying when your balance was high and you?ll pay it off much faster.
More Than Minimum Payments
Never pay just the minimum payment on your accounts. In order to make debt reduction plans work for you and get out of debt for good, you?ll need to find a way to pay more than just the minimum payment due each month.
If you?ve chosen the snowball method as your way of getting out of debt, then you?ll only be making excess payments on one debt at a time. As long as there?s extra money going on at least one of your debts, you?re making progress.
Motivation
The biggest problem with most debt reduction plans is that people lose motivation very quickly and fall back into their bad spending habits that got them into trouble in the first place. Find ways to keep your motivation levels high.
You might choose to use a debt reduction spreadsheet to track your progress. Or you might plan a really nice reward for yourself once your debts are gone. Think about how much money you spend each month on repayments. If all those repayments were gone, what would you prefer to spend that money on?
You might treat yourself by having enough money to save for a luxury vacation, or you might find there?s enough left over to save for a down payment on your own home. If you already have a mortgage, you could project your debt reduction plans onto paying this debt down next and work on being completely debt free.
Ruthsella Corasol is the Owner of http://WorkingAtHome101.com. Check us out anytime for marketing tips and a free subscription to our cutting edge newsletter.
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