Do you find yourself drowning in credit card debt and think your only way out is to refinance your home? While that’s certainly one way to do it, there are other ways, including handling the debt consolidation on your own.
Learn how you can make debt consolidation easy (and free) with these simple steps.
Get Your Credit Card Debt Organized
Before you can even start the debt consolidation process, you need to know what you are dealing with in terms of debt. Gather all of your credit card statements and tally up the total debt. You should also tally up the total minimum payments required.
This will give you a good idea of where you stand. It’s also very eye opening. When you look at your credit cards individually, they probably don’t seem too bad. Once you tally up those totals, though, it can be heart-wrenching to realize just how much money you have outstanding. In this list, make sure you note the APR on each credit card, as you will need this information later.
Figure Out Your Budget
Now it’s time to take a close look at your budget. Figure out exactly how much money you can pay towards your debts each month. As you look at your budget, make sure you include the minimum payments on each of your credit cards. You’ll be hitting these cards one by one, so you’ll have to stay up-to-date on the minimum payments on the remainder of your cards.
Choose the First Credit Card
Next, it’s time to figure out which credit card you want to hit first. Logically speaking, you may want to work with the credit card with the highest interest rate as it costs you the most. If this credit card has a low balance, though, you may want to work on credit cards that have lower interest rates but higher balances.
You will use the amount you figured out in the previous step that you could put towards your credit card debt and start paying that credit card balance down. Don’t forget that in the meantime you are still making the minimum payments on your other credit cards.
The goal here is to pay off the first credit card with your extra payments and then move onto another card. You’ll apply the same strategy to the next credit card, using the same money you just paid to the previous credit card plus the minimum payment you were making to this credit card. You keep doing this going down the line until you have all credit cards paid off and you are out of debt.
Contact Your Creditors
If you find that most of your credit cards have exceptionally high-interest rates, you may want to get in touch with your creditors. Let them know about your plan to get your debt under control and see if they can help you by lowering your interest rates. It never hurts to ask and sometimes the creditors do have lower rates available to you, especially if you’ve had a good payment history up until this point.
As a final step, make sure you constantly revisit your budget and your debt consolidation plan. You should keep an eye on your debts to see if it’s working. Are you seeing the balances drop? Are you paying less interest each month? Are you feeling motivated to keep the trend going? Notice you can do all of this without paying any fees or getting help from a professional. You can do it all on your own, getting yourself out of debt and hopefully staying there.