7 Smart Ways to Reduce Your Debt

7 Smart Ways to Reduce Your Debt

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1. Stop Accumulating Debt

Prevention is better than cure, you must have heard this many times. This goes the same here. Take a break from your credit cards or even freeze your card to reduce the temptation to take on extra debt. Prepare a budget to get an overview of all your expenses. A budget is surely a tool that could smartly tackle the debt. Knowing your expenses reduces your unwanted spending.

2. Increase your income

2. Increase your income

Increasing your income is the first and one of the smartest ways to reduce your debt temptation. The more revenue you put toward your debt, the sooner you’ll be able to eliminate it completely. Get yourself involved in putting some extra income which could help reduce your debt burden in the meantime.

3. Build an Emergency Fund

3. Build an Emergency Fund

Building an emergency fund is another smart way of reducing the debt temptation. It sounds counter-intuitive but it is effective in reducing any potential debt. It allows your use in reducing the debt instead of touching your saving account. These savings offer you a safety net that you can utilize for unexpected needs, it also prevents you from going for your credit card.

4. Inquire with your Creditor for a lower interest rate

4. Inquire with your Creditor for a lower interest rate

A higher interest rate does nothing but increases your debt hole because the interest amount goes towards the monthly interest charge making your actual balance higher. It is always to inquire your creditor (credit card issuers) for a lower interest rate. Interest rates are negotiable and asking for a lower interest rate could help you to reduce your debt. If you have a good payment history it is more likely to could get a power interest rate on your credit card.

5. Withdraw from your Retirement fund

5. Withdraw from your Retirement fund

Withdrawing from your retirement fund is another smart way to reduce your debt, but it should be your last option in the extreme case. It is highly recommended only in cases when you have no other option or you have other sources of income besides your monthly income. It is important to understand that Retirement fund withdraw could impact your saving post-retirement along with your interest, capital, and dividends, you could have earned from that money.

6. Debt Settlement

6. Debt Settlement

If you owe more than what you can repay in the set time period or your accounts are past the due date, debt settlement may be a good option to consider. In debt settlement, you ask your creditor to consider a one-time or lump-sum payment that is less than the whole total in order to settle down the bill completely. Creditors usually accept settlement proposals only on accounts that are in default or are about to default.

Debt settlement can have a negative impact on your credit score and should be utilized only as a last resort. Debt settlement could be also done by negotiating directly with the creditor. It’s a good option to negotiate directly or take the help of a reputable debt relief company.

7. Credit Counselling Agencies

7. Credit Counselling Agencies

It’s always good to take advice and suggestions when you lack ideas. Credit Counselling is one of the smartest ways to bring your debt in control. There are a number of credit counseling agencies that could help you in managing your finance and settling down your budget issues. These agencies are organizations or companies with a deep understanding of finance and credit issues.

All you need to do is send a lump-sum payment amount to the agency every month, and they will break it up and deliver it to your creditors on your behalf. Credit counseling differs from debt settlement in that it does not need you to be in default, and the aim is to pay off your debts in full.

Original news source Credit: www.goodreturns.in



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