Getting Rid Of Debt For Good - Kansas City Apartment and Rental Advice

We’ve all been warned not to charge away our futures, but the temptation to burn a little plastic can be strong. Sometimes, it’s too strong for our own good. When the outgoing column on your bill ledger is higher than the incoming, it’s beyond time to look into debt consolidation or other means to tackle payments that are out of control.

Getting out of debt once you’re in it is hard, anyone who tells you otherwise is fibbing. Paying $200 a month on a $7,000 balance will only remove a tiny bit of the principal if the interest tops 20 percent or more, which is the norm with a lot of department store cards or starter credit cards today.

What were once considered “loan shark” rates are common, so it pays, and in a big way, to have a game plan to tackle that debt once and for all.

Debt consolidation loans are a great way to go if you can get one. Many companies, banks and credit unions included, offer consolidation programs that require little or no collateral, which is important for renters who don’t necessarily have a house’s value they can borrow against.

The way debt consolidation works is fairly simple. You take out a loan to pay off all your high interest debts and roll them into one payment that should, ideally, be of lower interest. Instead of several high monthly payments, you make one that’s generally lower to a different company. The difference in lower interest consolidation loans is the fact the principal, that’s the actual money you borrowed and now owe, tends to go down faster than with traditional high interests cards or even loans.

The trick, however, is finding the right place to consolidate with. Here are a few tips on what to look for:

• If you don’t have collateral, but you do have good credit, look at “signature loans” with reputable banks, credit unions or consolidation companies. Pay attention to make sure the loan you roll your others into actually has a better interest rate or you’re probably not doing yourself a favor.
• If signature loans are out, check into using your car or some other higher value item you own as collateral for a “secured loan” to roll the bills into.
• Make sure the loan you get for consolidation covers it all. It really doesn’t help to leave “strays” around unless you intend to pay them off quickly and will.
• Check into different programs offered by banks, credit unions, credit card companies and debt consolidation services. Read the fine print and do shop around. The Internet is a good tool for locating companies, but be careful with whom you deal with. Personal information should only be transmitted to companies you know are legit.

Once your bills have been rolled into a single account, it’s a good idea to protect your credit and your future. It will not do you any good to charge up the now cleared off cards a second time. So, the best bet here is to cancel your accounts, especially the ones you don’t really need. Why keep a department store card with an outrageous limit and interest rate when a single “emergency” card with a decent limit and good interest rate will work in that store and others, too, if it’s absolutely necessary?

Now, if debt consolidation in a traditional sense will not work, there are still ways to get out of the hole without hitting the lottery. Here are some ideas:

• Contact creditors to see if you qualify for a better interest rate. It doesn’t hurt to ask.
• If you do have a card with a decent interest rate and it has free space, roll other accounts into it.
• Contact free credit counseling services. They might be able to negotiate with your creditors where you’ve failed and they generally are free to consumers. Do your homework about these places, though. Most are reputable, nonprofits, but be certain and read the fine print.
• If all else fails, set payments for all your accounts at just enough to cover the interest and a small amount of principle. Now, pick the card with the lowest balance and work toward paying this off by making a slightly higher payment or more on a monthly basis. Once this is paid off, roll that payment into the next low balance card. Rinse and repeat.

What ever you do, when it comes to debt consolidation, do you homework. It really does pay to get rid of the debt, but if you go from many high interest cards and loans to just one, you still aren’t ahead of the game.