How should I get rid of debt and improve credit

Submitted by Anonymous (not verified) on Fri, 08/06/2010 - 03:44

Hello everyone,

I have gotten myself into a bit of debt over the past few years but I really want to focus on getting rid of it and managing my money . I have been making minimum payments but I know that clearly is not wise. Below are the details:

Loans:

$618.52/mo. at 11.99% with 32 months left. This is what takes up a bulk of my pay. Whatever I can do to lower this would be very helpful.
Student loan: $57.91 at 4.75%

Credit Cards:

1. Amount owed $1033.40. APR 19.4%
2. Amount owed $336.07 APR 14.15%
3. Amount owed $358.32 APR 25.24%
4. Amount owed $950 APR 24.24%
5. Amount owed $285.31 APR 24.99%

Ideally I would love to consolidate and cut the interest (or even balances) if that's even possible. I read there are some programs out there that can help me do this and am researching this forum a bit more as well.

Any and all advice is welcome on what I can and should do.

Hi Rover,

Yes, paying minimum is not at all wise. If you want to get rid of debt soon, it is better to make more than minimum payments.

You should try to make two three payments each month towards each of your accounts. Generally creditors tend to charge more interest if you carry high balance on your cards. Thus, if you make two three payments each month, the balance will go down quickly, and the interest rate too will remain low. This helps a lot in getting rid of debt quickly.

However, if you think that it won't be possible for you to make more than one payment each month, you can consolidate the credit debts into one, and the loans into one. However, you should keep in mind that in debt consolidation depending upon the situation you may have to pay more. Sometimes, paying off debt through debt consolidation takes long time, and thus you pay more on the interest.

Thanks,

Aaron

Fri, 08/06/2010 - 07:28 Permalink

Hi Rover,

You have several options before you to get rid of your debts:

1) you can apply avalanche method: You should make a list of all your credit card accounts, according to the interest rate. Put the card with the highest interest rate at the top. After making minimum payments to each card, you should make an extra payment, in addition to the minimum to the first card of your list. Once that debt account gets paid off, you can repeat the same process with the card having the second highest interest rate..and so on.

2) Apply snowball method: You should make a list of your credit cards, keeping the card with the smallest interest balance at the top. After making minimum payments to all others, you should make an extra payment toward the first. Once you fully repay that debt, you can repeat the process with the next and carry on like this.

3) You can go for credit counseling, do calculation to see if debt consolidation will really be effective in your case. If it is so, go ahead.

4) balance transfer: You can transfer all the balance of your credit cards to the one, having lowest interest rate. However, if you need higher credit limit, this option may not be too good.

Do let me know about your monthly income and expenses in details. so that i can offer better suggestion.

Mon, 08/16/2010 - 15:55 Permalink

Hi,

First Check Your Credit Score and Get Your Credit Report

By getting credit report people can see exactly what the lenders and credit score agencies are seeing. Study credit report in detail. Is there anything that should not be there? Get on to bank or credit card company and see if they can remove an incorrect entry. There may be small amounts of missed payments and late payment charges. Aim to reduce them first. Study this document and consider ways of improvement. A person needs to identify the problem before he can attempt to solve them.

Newsletter Software

Fri, 08/20/2010 - 06:09 Permalink

Hi Rover,

You should get your credit report from both the 3 credit bureaus, Transunion and Equifax. You need to see whether there is any incorrect entry regarding late payment or non payment. If there is any, you should immediately write to the credit bureaus, have it investigated and then removed. When you start [aying your debts, following the methods i have mentioned earlier, you should also make it a point to check your credit report, whether your payment s are rightly and timely reported or not. If you have further queries, you're always welcome!! :)

Fri, 08/20/2010 - 09:42 Permalink