If you are sitting with a large balance on a credit card that has a high interest rate then you might be feeling frustrated as your monthly repayment is being used to pay the interest rather than the balance, which means your debt will only be reduced by a small amount each month. Paying off your high interest rate debts first will save you money in the long run, but this might not be the best method to undertake due to your finances.
Here are some top strategies that you can implement to help pay off your high interest rate debt.
Need a Lower Interest Rate – Just Ask
There are creditors that might be willing to lower the interest rates, but this generally goes to the best cardholders, which are the ones that have always paid on time or have only missed one or two payments.
If you have been getting lower rate offers from other credit cards then you can use this in your negotiations for a lower rate.
Make the Transfer to a Low Interest Rate Credit Card
You may only need a few months that are interest free to pay off your balance. You will find balance transfer cards that offer promotional periods where they do not charge interest. This could give you the break you need to pay off your balance without having to worry about the interest. Just make sure that you pay the balance before the interest kicks in.
If you are not able to move your entire balance to a single credit card then just move a portion as this will lighten the load and you can focus on paying this off before the interest is charged.
Take on Your Small Debts
If you are not in a position to first get rid of your high interest debts then you may want to consider tackling your smaller debts first. This will help you to free up some extra money that you can then use to pay down your high interest rate debts. You should create a list of your debts and determine which ones you can pay now and which ones will need to wait.
Once you have cleared a smaller debt, that money you were putting towards it should go straight to paying another credit card balance.
Wait…there are more strategies you can try…keep reading…
Pay The Most You Can
Due to most of your monthly payment going towards interest, you will need to pay more towards your payments in order for you to make any kind of progress in paying off your high interest debts. You may find it best to pay the minimum on all your other debts and any extra money that you have can go towards paying a single high interest rate debt.
Once one debt has been paid off you can start to work on your next highest interest rate debt and so on until you have cleared all of your debts.
Reduce Your Expenses
You will need to look at how you can squeeze your budget so that you have more to put towards your credit card debt. You can cut back on eating out, cut back on coffee, disconnect your cable, reduce your cell phone plan and so on. Making these cutbacks are only temporary and every little bit that you save to put towards your credit card debt will help your progress.
You Might Need to Wait
You may have to delay your debt free goal if you are not able to find extra money in your budget and are not able to generate any extra income. You should keep making the minimum monthly repayments on your credit card balances so that your credit score doesn’t take a hit and so that your debt doesn’t grow any further.
You will be wasting money on interest, but if you are not able to pay your high interest debts right now then wait a few months and then reassess your budget and expenses to see if anything has changed.
Get Credit Counselling
You can seek the help of a credit counsellor or a debt counsellor that will be able to create a debt management plan for you.
With a debt management plan, your creditors will lower your monthly payment and interest rate. You will not be able to use your credit cards during the process and your credit report may get a mark that says you worked with a debt counsellor.
The lower interest rates means that you can send larger monthly payments and you can ask that the additional payment goes to your higher rate first.
A debt consolidation loan is another option that you may have, but it’s not for everyone. This is where your debts are all housed under one loan, which means you will only have one repayment each month. This monthly repayment is usually lower and the interest rates are more manageable.
If you have high interest debt then you do need to tackle it whether, you pay smaller debts first or take on your largest and highest interest rate debt first. You need to look at how you are able to save money so you have extra to put towards your debt and determine the best strategy for you and your finances.