Whether it is credit card debt or loan payments, any kind of debt that has interest built into it can be very difficult to fully pay off since the longer the debt lasts, the more it accumulates.
One of the most basic strategies for stopping the accumulation of debt (besides cutting up your credit cards) is to make more than just the minimum payment allowed on the bill. However, besides this there are some other strategies to reduce interest payments and help you fully pay off your debt:
- If you have multiple credit cards, take a close look at the one that has the lowest interest rate. If it is not maxed out, you may want to consider converting bills that are on higher interest cards to this card. This will reduce the amount of interest that is accumulated monthly on your bill. If your card maxes out before you can combine all of you other higher interest bills onto it, start using the card with the next lowest interest rate until it too has been maxed out.
- Use liquid assets to pay off your debt. This means using the money in your savings account and cashing in your stocks and other securities to pay off that loan. The fact is that the rate of growth of these assets will never match the rate of growth of your debt, so do not hold off on using your assets to pay off your debt until they have surpassed your debt. Having paid off some or most of your debt so that your interest payments are decreased is well worth the assets you will be losing.
- Take out loans with cheaper interest rates that your credit cards to pay off debt. This can be a loan against your life insurance, a home equity loan, or even a loan on your 401(k) plan. This makes paying off your debt much easier since now you will not be paying as much in interest rates. Just make sure to keep your credit cards paid off until you have repaid these other loans.
Should I File for Personal Bankruptcy if My Debts Become Overwhelming?
Personal bankruptcy should be the absolute last resort for dealing with debts. It should only be done if it is impossible to pay off your debts. This is because there are some severe consequences for declaring bankruptcy. For one, you will have trouble getting any kind of credit for the next ten years. You will also either lose some of your property or control of your finances depending on what kind bankruptcy you have filed. Lastly, it also costs hundreds of dollars to file for bankruptcy.
Should I Consult an Attorney before Filing for Bankruptcy?
Definitely. Bankruptcy is not something to be taken lightly, and a bankruptcy attorney can advise you of your options for paying off debt and help you decide whether it is really going to be necessary for you to file for bankruptcy. If you do decide to file for bankruptcy, your attorney can help you decide what kind of bankruptcy to file for and help guide you through the procedure for doing so.