If you carry expensive credit card debt I don’t need to tell you how burdensome it can be. Unpaid credit card debt is like a dark cloud that follows you everywhere you go. It’s hard to relax and enjoy just about anything with those high cost obligations hanging over your head. I get it.
But I have some good news if you are in this situation. There are at least 5 tactics you can employ to slash the cost of those liabilities and to release yourself from that depressing debt.
The trick to getting out of debt fast is to slash your interest costs to the bare bone as quickly as possible. By doing that, you can apply more of your payments towards the principal you owe and dispatch the obligation all the quicker.
Let’s assume you owe $5000 to Bad Card Credit Company Inc. and you are paying them $100 a month. If they charge you 14%, it will take you 7 years to get these people off your back. But if you refinance this debt and find a lender who will only charge you 5% it will take you 5 years. That’s a huge savings. Let’s get to work refinancing your debt right now.
1. Refinance With Family or Friends
Done right, getting your loved ones to carry your debt can be a win-win for everyone. Here’s how it works. Someone in your clan loans you the money at a fair (but far lower) rate to pay off the credit card company. You take the same amount you used to send to your credit card company and send it to your new benefactor.
Because the rate is lower, you’ll be debt free much sooner. And because the fair rate you pay your private lender is much higher than the measly rates the banks pay, they earn more money than they otherwise could and they help someone they care about (you) at the same time.
In order to get someone in your family to agree to this make sure you come to them with a solid payment plan before you make your request. This shows them that you are serious and that you’ve thought it through. Oh and one more thing; make sure you stick to your payment promises no matter what.
2. Lower Cost Commercial Lenders
If nobody in your inner circle is willing or able to refinance your debt you still have options. Check out peer-to-peer lending companies as an alternative. These are private companies that match people who need money (you) with people who have money to invest.
This is a huge business and very popular among borrowers because many are able to cut their interest costs by 30% to 50%. If you have good credit, this should be one alternative you definitely consider.
3. Work It Off
This is really a variation on the option I explained above. Rather than make loan payments it may work out better for both you and your friend or family member to pay back your loan with work you perform rather than with money.
Does Uncle Larry need the house painted? Does Cousin Mary need yard work done? If so, why not offer your services? For you, this is like finding a side job and slashing your interest costs and debt all at the same time. Fantastic. And for your patron it gets work done by someone they trust.
4. Melt Your Debt Snowball
You’ve likely read many times about the wisdom of paying off your highest cost debts first and for good reason. Make the minimum payments on everything else and put all your efforts into destroying the highest interest loans first. Once you pay off the most expensive credit card, keep your payments the same but put it all towards the next highest cost card balance. When you do this, a higher percentage of your total payment eats into your principal debt (a good thing) and less money is wasted on interest (also a good thing). As a result, you’ll be out of debt much quicker. Yea!
If what I’ve suggested so far is outside your comfort zone, it’s time to call in my secret weapon for financial success – accountability. I urge you to call a friend, relative or mentor and tell them three things:
- What the problem is.
- What you are going to do about it.
- When you are going to do it.
This doesn’t guarantee results but it does guarantee action. When you take this step you declare to the world that you are committed to solving your debt problem. And when you check in with your accountability partner each week you increase the likelihood of reaching your goal by a factor of 10. At least that’s been my experience.
I can’t explain why this works but it does. When we promise someone else what we are going to do we tend to do it more often than when we simply make a promise to ourselves.
Get of credit card debt fast by cutting your cost of debt, refinancing, working it off, paying off your highest cost debt first and being accountable to take action. It works.
If you are in debt, what are you going to do about it? When?
Neal Frankle is a Certified Financial Planner based in Los Angeles California. He is also an accomplished writer and runs both WealthPilgrim.com and MCMHA.org to help consumers make better decisions about their finances.