Avoid Compounding Credit Debt
When borrowing money the goal is to borrow with the lowest interest rates possible. Even with interest rates being at a historic low that may not be as easy as it sounds. Low interest rates tend to go to those with good to excellent credit.
It is vital to find credit vehicles with the lowest interest possible if you plan to carry balances month to month. High interest credit borrowing lead many Americans to be entrenched in debt. Many Americans pay only the minimum payment on their debt. The majority of the minimum payment is payment on the interest only. Very little of the minimum payment goes to the actual principal of the credit loan debt. You need to be aware of credit card debt warning signs.
What can I do to reduce Credit debt Fast?
One easy way to reduce your debt on credit is to pay a little more towards the principal each month. This can over time greatly reduce your debt. When you pay down your principal you limit the amount of interest you are charged and thus allowing you to slowly climb out of debt. Even if you can afford to put down only an extra 5 – 10% on your minimum payment it will help greatly.
Credit cards are an easy way to grow debt fast. Most credit cards have interest rates at 18% or more. Department store credit cards tend to have the highest interest rates. Getting the lowest fixed rate credit cards help slow down the rate of debt growth. In addition as mentioned before it is important to pay more than the minimum balance if you carry balances from month to month.
Avoid missing payments on any credit loan. When you miss a payment, a late payment fee is added. You are now paying more interest because no principal was paid and you are now paying additional interest on your late payment fee. What’s more is when you miss payments you are lowering your credit score. When you lose too many points from your credit score it makes it impossible to get approved for credit or good interest rates on credit. Lastly if you have a great interest rate and you miss too many payments you may have your interest rate raised by your lender.
The final way to stop debt from compounding is charge your needs and pay cash for your wants. This final advice is quite simple. Some people will complain and say that they have to charge to get by. That is understandable. We live in difficult economic times. If you need gas for your car charge it. If you want a Grande Mocha from Starbucks pay cash.
These simple steps will slow the compounding of credit debt. Over time it is possible to go debt free. Following these steps might not prevent acquiring debt entirely, but it will prevent thousands of dollars of accrued credit debt in the course of a lifetime.
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