Step 4 – Reducing Your Interest

If you have read the previous articles, so far you have learned how wide spread of a problem debt is, the true impact it can have on your life, and how to determine exactly how much debt you have and how much it will actually cost you. The next step is to attempt to reduce your interest rate. There are several ways you can accomplish this.

We’ll start by looking at what are typically known as the highest-interest debt, credit cards. Believe it or not, one of the easiest ways to do this is to simply call your credit card issuer and ask them to reduce your rate. This sounds laughable at first, but quite often it actually works. Credit card issuers typically charge customers much higher interest rates for the money they loan than what they pay to borrow it from others. This leads to huge profit margins, which means they really want to keep you as a customer, especially if you regularly pay your bill on time. They know you have plenty of options available, and are likely to switch to another credit card issuer if you feel you can get a better deal, so they’re happy to make a slightly smaller profit and keep you as a customer by lowering your rate.

If that doesn’t work, a second option is to find a lower-rate credit card and roll your balance over to it. You may be tempted to go with a card that has a 0% introductory rate. This is probably not your best option though, unless you plan on paying off the card within six months. What you want to look for is a card with a low permanent rate. There are several sites available to where you can compare credit cards from multiple issuers such as Creditor Web, http://www.creditorweb.com/.

There are also several broader options available for credit cards and other types of debt. One of which is to look into refinancing any loans you have. Interest rates go up and down over time, and it’s quite possible the rate you can get now is lower than what it was at the time you originally financed the loans. Often there will be a refinancing fee involved, so use the amortization calculator from the previous article to make sure the amount you are going to save is greater than the amount you will have to pay.
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Nowadays, debt has become a standard part of life. It comes in many forms including student loans, medical bills, auto loans, unpaid utilities, mortgages, money borrowed from friends and relatives, store credit and the most dreaded of them all, credit card debt. It’s a part of life for almost all of us, rich or poor, but it doesn’t have to be. In this nine-part series of articles you will learn the steps to take to become completely debt-free and stay debt-free.

Let me start off by saying not all debt is necessarily bad. It can be very beneficial to borrow money sometimes, if done for the right reason. For example, taking out a mortgage to buy even a modest home will most likely cost you several hundred thousands of dollars over the life of the loan, however you will gain equity and the house will usually appreciate in value, making it a better option in a lot of cases than living in an apartment. Other examples would be borrowing money for college in order to acquire a higher paying job, or borrowing money to start a business. Other times it is just un-avoidable such as a medical condition or loss of a job. They key is to borrow for the right reasons.
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Danger signal 1
Your credit card expenses increase while your income is the same or decreasing. When this happens stop using your cards and manage on whatever cash you have available. Stop when the cash is finished unless there is a great emergency – do not take out the cards. Diminishing income will suffer greatly if the bills of the credit card are added to it; get away from card shopping till your income stabilizes.

Danger signal 2
You are unable to pay more than your minimum balance on the card debts; this is when it should be obvious that cash problem has started; this is the time when you should leave the credit cards and try to pay off all your outstanding by wise financial management.
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As debt continues to increase in many households across America, more families each year are finding themselves looking for ways to reduce their overall household debt. For some, this may be easier said than done. Debt reduction requires a lot of hard work and dedication. Especially when you are used to spending money left and right.

Those that are serious and committed to reducing their debt will eventually reap the rewards of being debt free. Reading my simple seven tips will give you many ideas, about how you can reduce your debt.

Cut back
When you start to cut back on spending, you will find corners that you can cut through out the month, to help you pay off your debts. Simple things such as, being aware of all of the electricity you use, and turning off lights that are not needed as you leave a room, will help reduce your light bill, therefore, you save a little more money to reduce your debt with. Once you become aware of your spending habits, and start cutting back, you will start to notice more ways to cut back each month.

Budget
Budget your income. List all of your monthly bills and their due dates. Apply them to your budget, as well as other household needs, for example, groceries, gas etc. Allow yourself only so much money per month to spend on extras. Sticking to your budget will show self control, and determination for reducing your debt.
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