April 1, 2023

Lemon Law

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6 Tips to Get out of Debt

6 Tips to Get out of Debt

Do you want to get out of debt? If so here are some great tips to reduce the amount your owe.

Bumping up Debt Repayment Percentage

You need to put at least 15 percent of your paycheck – or income from your pensions or Social Security – to pay your loans and credit debts because it is going to help you pay down your obligations faster. Most credit card companies usually ask their customers to pay about 2% of their balance each month. When you make small minimum payments, the debt is still collecting interest with every month that goes by. When you pay a large chunk of your debt in a couple of months is going to save you a lot of money in interest payments.

Using your Savings to Pay Down Large Debts

You should not fear using part of your savings towards paying down high-interest debts. Using your savings to pay for debts is a good idea because you will avoid accruing interest on your large balances. While having some cash in your bank account feels comforting, but this isn’t ideal because money in your account is not working for you, especially given the low-interest rate on savings. This doesn’t mean depleting your savings. Use part of your savings to reduce your debt instead of sitting on a pile of cash.

Negotiating for a Lower Interest Rate

It is possible to negotiate a lower interest rate, but it depends on the creditor. There are some who can reduce your interest rate based on your account standing and payment history.

If you have had a good relationship with the creditor for a few years, you are in a good position to get a lower interest rate. When the interest rate is reduced, you are going to save a lot on interest payments and end up paying down your debts a little quicker. Make sure you use a direct lender.

Using your Tax Refunds to Pay Down your Debts

When you get your tax refund, it is tempting to use it to go on a vacation or a high-ticket time, but don’t do this when you have debt. Use the money to pay down your debt. Maybe your refund is enough to pay off your debts. When you make a lump sum debt payment, you save yourself a lot of money and stress. You are going to have a lighter debt load for the next couple of months or even years. You are going to get short-term satisfaction when you go on a vacation or buy an expensive item, but paying your debt is going to be a long-term satisfaction.

Selling Items for Cash

Make a list of all the items you can sell on eBay, garage sale, or Craigslist. You can make extra cash by selling items that you no longer use or you can part with – use this money to pay down your debt – and you will find yourself with a lighter debt load.

Think about Cashing in your Life Insurance

Another viable option to pay down your debt is to cash in your life insurance and use the money to do it. You can pay down a large amount of your debt using this cash. If you find yourself in a lot of debt and you have no beneficiaries benefiting from your life insurance policy – like children or a spouse – then it might be a good idea to use the funds to pay down your debts.

This strategy is not going to work for those who own a term life insurance policy. This is a strategy to use when you have a whole life policy that has built up cash value. Even if you have beneficiaries, you can still take a part of the cash value. This means you get cash to use in paying down your debt, but still have life insurance proceeds for your loved ones.