Friday, March 8, 2013

Make Credit Card Debt Disappear, Even If You're Retired!

Retirement isn't supposed to be a debt riddled way of life. It should be a worry free, enjoyable time. Unfortunately, for many consumers debt has ruined their retirement. But what if I told you that, you could still pay your debts off? What if I told you that you could do it paying no more than your minimum payments right now? Well, you'd probably think I was trying to sell you something. Good news, I'm not, you can do it on your own! No need to pay that debt consolidation company $3,000 to do it for you. It's actually pretty simple, here's how:

Step #1: Make A List Of Your Debts: 

I've seen the smartest people I know make stupid mistakes because they forgot to prepare before doing something. When you do anything as important as working your way out of debt, it's vital that you get prepared. To do so, you will need to understand your debts. Start by making a list of all of your credit cards with a balance. Make sure to order your list from highest interest rate to lowest. Also, it should include the lender name, interest rate, balance, minimum payment, customer service phone number and pay to address for each of your credit card debts.

Step #2: Decide How To Go About Reducing Your Interest Rates: 

There are 2 different options that you can chose from for DIY interest rate reduction, first is interest rate negotiations and balance transfers, the second is financial hardship programs. Either of these options coupled with solid, aggressive payment plans, which I will go over later can prove to be a dream come true for you and your family. So, how do you decide? It takes a bit more than one paragraph so, I'm going to separate this step into sub-steps:

  1. Check Your Debt To Income Ration – Add all of your credit card balances up. Do they add up to more than 15% of your annual income? This plays a crucial role in your decision because if your debts add up to more than 15% of your annual income, chances are, you will not qualify for enough of a credit line to transfer your balances via balance transfer credit cards. Also, you may be in the midst of a financial hardship.
  2. Add Up All Of Your Minimum Payments – Can you afford to pay at least that amount of money every month? If not, you are dealing with a financial hardship and your lender has assistance for you.
  3. Figure Out Your Credit Scores – If you have poor to fair credit scores, the truth is, you will not qualify for any balance transfer credit cards that are worth applying for. This however is often a sign of financial hardship!
  4. Make Your Decision – If your debt to income ratio is too high, you can't afford to send at least your minimum payment comfortably and you have bad credit scores, financial hardship programs will be a better option for you than balance transfer credit cards. However, if you do have a low debt to income ratio, good credit scores and can afford to pay make your payments with a little extra comfortably, balance transfer credit cards are going to be your best option.

Step #3: Reduce Your Interest Rates: 

I have written several publications on both options for reducing your interest rates. If you decide on financial hardship programs, I suggest reading, “Understanding And Applying For Credit Card Hardship Programs”. If you decide that you would rather use balance transfer credit cards for interest rate reduction, please read “Do It Yourself Credit Card Debt Consolidation”.

Step #4: Decide On A Constant Payment: 

Have you ever noticed that as you pay your credit card bills, every month or two, the payments get a few cents or even a buck lower? This is because your minimum payment is based on your credit card balance. Therefore, if you can commit to sending no less than your minimum payments this month, you can commit to sending more than your minimum payments in the future. Every extra penny going to your principle balance saves you money in the long run. So, to decide on a constant payment, add all of your minimum payments together. Can you afford to send more than the total? If so, write down the total payment you can afford. Now, commit to sending no less than this every month until your debts are completely paid off. If you do so, you stand to save thousands of dollars in interest and years of time paying off your debts!

Step #5: Stack Your Debts: 

The debt stacking payment method is one that attacks your highest interest rate first. To do so, send minimum payments to all of your credit cards with the exception of the highest interest rate each month. All extra funds left within your constant payment should be directed to your highest interest rate. When your highest interest rate credit card is paid off, don't go back to making small payments and keeping the rest! Now, send all extra funds to your next highest. This aggressive payment method will really get you paid off fast!

My Conclusion

Even if you're retired, you don't have to live with credit card debts. If you follow this plan, you will be free in just a few years and finally be able to enjoy your retirement. I hope you've enjoyed my article and hope you come back to read more to come!

About The Author – Joshua Rodriguez

This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance author. This article was inspired by his most recent series, “Balance Transfer Credit Cards – A 7 Step Guide To Understanding This Option”. Join the discussion about this article, Joshua's series or any personal finance topic of your choice on Google+!

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