Now that Christmas has come and gone, there's one thing that lingers - the debt accrued in purchasing gifts and hosting holiday parties. And considering Christmas is at the end of the year, the money spent in December is just the cherry on top of the debt-layered cake that has been around all year long. So in an effort to get you out of debt and into a healthy spending pattern, Main Street offers five ways to become debt free this upcoming year. Sounds like a worthy resolution to me! 1. Evaluate Necessities: The most logical step is also the hardest! It sounds simple to get rid of the things that aren't necessary, but what's considered unnecessary? Although answers to this question are undoubtedly different, the best way to put it is to only pay for the things that you absolutely cannot live without - food, housing, health insurance, etc. Therefore, elaborate cell phone and cable packages are not necessities - and neither are vacations, restaurants, and shopping sprees. The money you save by cutting out the extras can in turn be applied towards any debt you may have, eliminating your deficit quicker as you are paying more off, while not spending and adding more debt. 2. Strategically Make Payments: Most debt doesn't originate from a single credit card, but rather a combination of balances held on various cards with different interest rates. To effectively lower the cost of your debt you should concentrate payments toward the debt with the highest associated APR. After you reach a zero balance on all of your cards, you can use their monthly payment allocation to your car payment, school loan, or mortgage until you are completely debt free. 3. Don't Pay Less Than the Minimum...Ever: Generally speaking, credit card companies regard payments below the minimum amount required as no payment at all. So if you don't have enough money to cover the minimum, it's suggested that you refrain from paying anything until you do. However, if you are delinquent, keep in mind that there's a big difference between the required minimum and the total amount due - the minimum payment is the amount required to avoid slipping further into delinquency, while the total amount due is what you must pay to become current on your payments, which is the sum of the minimum payments you have missed plus the upcoming minimum payment. 4. Negotiate: If you start falling into delinquency and the above options prove unsuccessful, it's recommended that you call your lender and try to negotiate for a lower debt total, decreased interest rates or a repayment plan that involves a lower monthly minimum. Be mindful that you must approach these negotiations with knowledge and tact. When calling the issuer, know how much you can afford in terms of the lump-sum and per-month payments. Explain your situation calmly and politely and do not exceed your means with the terms of any agreement, because breaking restructured terms will likely trigger expensive penalties. 5. Consult a Professional: If your negotiation efforts fail and your debt continues to worsen, it may be in your best interest to pay a professional for debt settlement or debt management services. Debt settlement is when your credit card company is concerned by the fact that you are severely delinquent and agrees to lower your debt in return for you paying off the decreased sum with a single payment. Debt management involves developing a payment plan that often includes lowered interest rates and decreased monthly payments in exchange for closing all your credit cards. While these methods require an outlay of money, they might be worth the extra cost because of the experience and relationships these organizations bring to the table. Do NOT pay any company that promises debt relief before it actually provides you with tangible results. If these options are inapplicable or unsuccessful, you might want to consult a bankruptcy attorney. Bankruptcy is a last resort, but don't take it out of consideration if it helps you in the long term.
