FINANCIAL RESOLUTION #2: PAYING OFF DEBT
According to a 2019 study by Northwestern Mutual, most American pays at least a third of their income toward debt. Credit card and loan companies have made it easier for people to qualify for an account. Making the financial resolution to pay your debt off is a good start. But to be successful, consider making a plan.
DEBT PAY-OFF METHODS
A few months ago, GoodMoneyAdvice.com published another article, “Managing Credit Card Debt,” which shared the Snowball Method and the Avalanche Method for paying off debt. However, there are other options to consider.
- Credit Card Transfer – Consider transferring high credit card balances to lower interest cards. Many cards offer zero percent interest on credit card transfers up to a certain amount or within a limited timeframe. Credit Karma’s top five credit card options for zero percent interest include:
- Citi Simplicity
- Capital One Quicksilver
- American Express Blue Cash Everyday
- Chase Freedom Unlimited
- Capital One Savor One Cash Rewards
With twelve to fifteen months to pay off the transfer without incurring any interest, this can be a good option for paying off debt.
- Personal Loan – a personal loan or consolidation loan offers the ability to make a single payment to pay off multiple accounts. It can also be a credit booster, because it does not have the same effect on a credit report as a credit card does. Note: if you use this method, do not close your credit card accounts. Doing so could lower your credit score. Companies to consider are:
- LightStream – minimum credit score 660, APR 5.5% to 17.5%
- FreedomPlus – minimum credit score 640, APR 6.o% to 30%, minimum loan amount $7,500.00
- SoFi – minimum credit score 680, APR 6.0% to 20.0%
- BestEgg – minimum credit score 640, APR 9.3% to 12.8%
- Avant – minimum credit score 580, APR 9.95% to 35.99%
- Debt Settlement – if the options above are not possible, then consider contacting the creditor. Most times a lump sum payment of at least 50 percent of the amount owed can be offered to settle the debt. While there are companies that can help do this, it can be difficult to find a reputable company. Besides, it is possible for you to settle your debts on your own.
- Bankruptcy – this option is a last resort option but should be mentioned. Sometimes debt becomes overwhelming. If this is your situation, then exploring your options might be best. There are two types of bankruptcy for individuals.
- Chapter 7 – this chapter can release you completely from your debt, allow you to keep at least one car and your home.
- Chapter 13 – this chapter allows you to repay your creditors in a monthly payment administered by the court.
If you decide bankruptcy is the right option for you, speak with an attorney. They will help you decide the chapter that is right for you.
Any of the methods can give you immediate rewards by lowering your payment, however, use caution if you continue to use your credit cards. The point is to alleviate your debt and have a more positive cash flow. Financial resolutions are like another other resolution. They take time and effort and dedication. Creating a plan of action to attain your financial goals will help you to remain focused and motivated.
Greta Gunselman is a personal finance freelance writer. Proud owner of a BA in English, she spends her time talking about finance over on Twitter (@thisgirlswalle1) and post-military life at lifeafterthemilitary.blog. If you’d like more information about Greta’s writing, please contact her through her website, thisgirlswallet.com