Manage Debt (Part 2)

Ten Ways You Can Pay Off Your Debt
(part – 2)

5) Transfer
Debt To A Low-Interest Card:

If your low-interest card hasn’t been maxed out, and your creditor
allows, you should consider transferring all your high-interest
debt to it. This strategy won’t eliminate your debt, but it can
lower your costs. Call the bank that issues your card and ask for
a lower rate. Tell them another company has offered you a better
rate with no annual fee. You will be surprised at what your lender
will do to keep your business.

Another alternative is to take advantage of the introductory rates
many card issuers offer to get you to switch credit cards. We’ve
all seen the rates that start out at 5.9%. This temporary solution
may save you a few bucks in interest and allow you to pay down
more principal each month.

A word of caution: Read the fine print before you act. Many of
these "teaser rates" last only a few months. After that,
the rate may rise dramatically, even exceeding the rate you’re
currently paying. The terms of your card may also stipulate that
the low rate applies only to new purchases, not existing balances
and that it is valid only to account balances kept for at least a
12-month period. Be careful how you execute this strategy.

6) Borrow From Family Or Friends:

Borrowing from your family or friends is worth considering. After
all, they know you, trust you, and probably understand your
financial situation better than anyone else. They might even cut
you a favorable interest rate or repayment plan. Make sure you put
the agreement in writing and that all parties involved understand
the terms and conditions of the loan. Keep this part of the
relationship professional.

Some alternatives to help solidify the deal:
a) Call the loan an early inheritance and  make sure your
siblings fully understand your financial situation so they don’t
get upset.
b) Split the difference. Pay them an interest rate that is less
than what you’re currently paying but considerably higher than
what they would earn in a liquid account.

7) Cut Expenses:

An effective way to find money and pay debts is to reduce your
expenses. Is it possible that what you consider necessities are
really optional? There are a variety of things you can do in your
daily life that can produce big savings. Here are a few simple

  • Pack your own lunch for work

  • Buy generic brands

  • Buy second-hand clothing or

  • Cancel your health club

  • Clip coupons

  • Cancel your cable service

  • Cancel your extra phone services
    such as Caller-ID or Call-Waiting

  • Read books, magazines, and
    newspapers at the library instead
    of buying them

  • Carpool to and from work or

  • Skip your daily latte or candy

  • Rent movies instead of going to
    the  theater and buying those
    expensive goodies

8) Obtain A Home Equity Loan:

If you own a home and have accumulated equity throughout the
years, you might consider a home equity loan, also called a second
mortgage. Many lenders allow you to borrow against a certain
percentage (usually 80%) of the equity in your home. For example,
if you owed $50,000 on a house that was appraised at $150,000,
your equity would be $100,000 ($150,000 – $50,000). You’d be
able to borrow up to $80,000, or 80% of $100,000. 

You can use this type of loan to pay off all your outstanding
debts and start paying only one monthly payment at a lower
interest rate. The interest on home equity loans is generally
tax-deductible if you itemize on your income tax return. You’re
effectively getting one of the cheapest rates for personal
consumer debt.

This type of debt consolidation is not for everyone however. It
only works if you stay disciplined and avoid charging up your
cards again. The last thing you want to do is have credit card
bills to pay on top of the home equity loan payments you’ve just

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