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Credit Card Debt Consolidation Nationwide Epidemic
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How to Pay Your Way Out of Credit Card Debt
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Terminate Credit Card Debt Without Consolidation
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Interest Rates on Loans and Credit Cards


What is interest?

Interest is the amount that is paid back in addition to the amount you borrowed when you take out a loan. Basically, interest is a fee for borrowing money. It’s how lenders make a profit from giving out loans.

How is interest calculated?

Interest is calculated based on your amount of debt and then divided by 12 months. For instance, if you have a credit card with an interest rate of 24% and a balance of $1000, you would multiply 1000 by 0.24 and then divide that number by 12, which gives you the amount of interest you’ll pay that month. In this case, $20. A lot of the time creditors will set your monthly payment to barely cover the interest, so in this case, you may have a $30-$35 payment, effectively keeping you in debt longer by not allowing you to quickly pay down the principle.

Interest on Loans and Credit Cards

When taking out a loan, always remember that it is money that is being borrowed and you’re paying interest to use it under the promise that you pay it back as soon as you can. For credit cards, any purchases made on your card before paying off previous amounts, are added to your balance and you’ll pay interest on the entire amount. This will change your minimum payment amount as well if the minimum payment is based on a percentage of your balance. By keeping low balances on Credit Cards (ideally beneath 30% of your credit limit) you can avoid getting hit by high-interest charges.

Paying Back Loans and Credit Cards

What you can do on your own to pay back your credit cards and loans efficiently and effectively are a few things:

1. Pay over the minimum payment

If you have a savings account with at least 3 months of your total outgoing monthly expenses saved up, you should be making above minimum payments as often as possible until your debt is paid off. This seems self-explanatory, but a lot of people are against making above minimum payments because they don’t want to pay more than they feel like they have to. Well, those people are only hurting themselves and putting more money into the pockets of their creditors. If you have the ability to make additional payments above your minimum it is ALWAYS applied directly to the principle. It is 100% in your best interest financially to make above your minimum payment if your funds allow it.

2. Stop charging on your accounts frequently

The only way to get out of debt is to stop accruing it. You should only be charging on your accounts when something requires a credit card or to use it once a month to show activity on your account, only if you’re beneath 30% of your credit limit though. If you’re the type of person who feels like they have to charge on their accounts and you find it difficult to control that urge then there is something you can do, freeze your cards, literally. Take your credit cards and stick them in a Tupperware container or a plastic bag and freeze it. You cant charge on it if it’s frozen and if there is an emergency you can always defrost it underwater, but you probably won’t feel good doing that unless you absolutely had to.

3. Pay your balance off in full

Again, this only applies if you have 3 months of your total outgoing monthly expenses saved up in a savings account. Pay your debt in full, this is the best way to avoid any interest charges. As long as you pay your balance in full there should be no interest charged. This is especially true for small balances that can easily be paid in full.

What if I can’t do those things?

Don’t panic, your situation is very common. You are not alone, not by a long shot. There are companies who specialize in assisting people just like you. Consumer Credit Counseling agencies are one type that can help you reduce interest rates on unsecured debt and pay your debt back quickly and efficiently. Debt settlement exists if you cannot afford to do credit counseling and have no other options other than bankruptcy, which is rarely the answer.

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