That’s right, debt reduction strategies are not for the weak in spirit or the faint of heart. Reducing your debt takes extreme commitment and a solid resolve. Getting out of debt without help from a third party is the safest way to go. It will be harder to do but it will take less time and your credit report will be much better off in the end.
Debt consolidation loans add negative marks, or rather, reduce the points on your credit report. So does employing a third party such as a debt management company. Debt counselors may be able to negotiate lower interest rates or longer terms which will lower your monthly payment but they are not free, you will have to share. Debt consolidation loans can reduce your monthly payment by putting all the different payments into one but the savings may not be as profound as you might hope. Biting the bullet and going it alone will get you there faster, cheaper, and will definitely raise your credit score.
Obviously the first step is to stop using your credit cards and begin paying for everything with cash. A debit card is a solid solution for this as it is a Visa or Master Card but it is not a loan, it draws from existing funds in your checking account.
One strategy for debt elimination called the snowball method. This has been proven quite effective by many people. The way the snowball method works is you must first gather up all your debts and place them in order, from the smallest to the biggest. You start by focusing on the smallest debt first by paying at least twice the minimum amount every month, more if you can. The other cards are maintained by paying only the minimum required amounts. You do this until the first debt is paid off in full. You then move on to the next. You apply the amount you have been paying on the first debt to this one as well. Once this one is paid you move up to the next biggest one, so on, and so forth. Finally you hit the last, and biggest debt and apply all the money you had allocated for the others to it.
You may be thinking, this seems a bit illogical since all the bigger loans are accumulating huge amounts of interest while I’m focusing on the smaller ones. However, it has been proven that the small triumphs of defeating the first loans add to your momentum, your resolve, and your determination to complete the task. Otherwise, by trying to take on the biggest loan first, discouragement may set in as the task could appear to big to handle.
Debt reduction strategies, no matter how you decide to implement them, are a nasty job. If you do decide to go for it be prepared to make sacrifices and make extreme changes to your lifestyle. In the long run you will be better off financially, that’s obvious, what is not as obvious is the confidence and self knowledge you will have gained from breaking bad habits and cleaning out useless motivations.