How to Get Out of Credit Card Debt (Kredittkortgjeld)?

Published: March 2, 2021

Are you deep into debt? Although it seems unfeasible for most debtors to get out of such financial problems, being debt-free is entirely possible by using the right strategy. A financial evaluation is essential in order for debtors to set spending priorities and decide on the best debt reduction strategy.

In case dealing with such problems is overly stressful for you, there are credit counselors ready to lend you a hand and provide you with detailed advice. When dealing with credit card (kredittkort) debt, make sure you prioritize your spending and set a strategy.

The following tips will prove helpful in your journey.

Evaluate your financial situation

In order to eliminate your debt successfully, start by assessing your financial situation. Regardless of how much you try to avoid the harsh reality, coming to terms with your financial problems is considered essential. Make sure you create a list that includes all of your debts, as well as your monthly bills. It’s paramount to include the APR (annual percentage rate) when doing the calculations, as it increases the overall amount of money you owe.

Once you complete the list, have a detailed look at the balance of each credit card. Some individuals decide to pay off the debt on the cards with the highest interest in order not to waste plenty of money on interest. In contrast, others choose to start at the bottom and work their way to the top by consolidating the debt on their low-interest cards first.

After you select a convenient strategy, it’s time to make a comparison of your debts and income. Credit card balance isn’t the only factor to consider when comparing costs. You are also supposed to consider your mortgage payment, rent, and the money you spend on groceries.

Set spending priorities

One of the most effective ways to get rid of credit card debt is by setting the right priorities when it comes to spending. You are advised to start with secured debts, which involve collateral. Unless you pay off the amount you owe on time, you will be deprived of the asset you chose as collateral. Hence, you might end up without your house or car.

After making sure your secured debt is paid off, you should move to the one on your credit card. Nowadays, there are numerous online calculators helping borrowers determine the approximate payoff timeframe by entering basic information such as your balance and interest rate. You can also enter a particular timeframe in order to determine the monthly payment you’ll be required to return.

Many people make the mistake of neglecting their student loan debt. Nevertheless, federal authorities would never forget your obligation regarding the loan, which is why you need to make at least minimal payments. Otherwise, your wages and social security benefits will be collected by the federal government. Click here for a better understanding of the process of garnishment.

A promising solution would be applying for a 0% balance credit card. Most individuals are skeptical about this strategy, as it involves setting up a new account in order to close the previous one. Nevertheless, 0% balance credit cards are a beneficial long-term solution, particularly those providing long introductory periods, during which borrowers pay no interest. By transferring your debt to such an account you won’t be paying any interest in a period of at least fifteen to eighteen months.

Another potential solution for consolidating your outstanding financial obligation is by taking out a personal loan to cover the amount you owe. Although personal loans impose interest rates, these are lower than the rates borrowers pay for credit cards.

Select the right strategy

An important step towards getting out of debt is selecting the right reduction strategy. For instance, the avalanche method advises borrowers to pay off the high-interest balances first in order to become debt-free as soon as possible. The strategy involves making minimal payments on all balances, except for the balance with the highest annual percentage rate. Regarding the balance with the highest APR, try paying a larger sum, as large as you can afford.

Additionally, this procedure is supposed to be repeated on a monthly basis until the highest-interest debt is erased. Afterward, the same strategy is applied to the balance with the second-highest APR. The avalanche method is considered the most effective when it comes to saving money on interest rates.

The snowball method, on the other hand, involves an opposite approach, advising borrowers to start repaying the smallest balances until they reach the ones with the largest APRs. You are also supposed to make minimal payments on every account, except for the one with the lowest annual percentage rate. The snowball strategy is unquestionably most beneficial in terms of becoming more confident when repaying the money you owe.

Ultimately, the blizzard method is a combination of the avalanche and snowball method. Borrowers are suggested to pay the lowest interest balance first, followed by the highest balance. This strategy provides the best of both worlds to borrowers, enabling them to save money on interest while experiencing a confidence boost.

Reduce your expenses

Another productive way of getting out of credit card debt is by reducing your expenses as much as possible. Unfortunately, you’d have to give up on some luxuries in the course of a given period, such as dining out, going to the gym, watching cable TV, etc. Make sure to give up the luxuries you can live without, as well as think of another source of income.

For instance, working overtime is a practical method of earning extra income. Try volunteering whenever possible in order to collect more money. In case you have a creative hobby, such as jewelry design, why not turn it into a profitable opportunity?

Final word

Owing money triggers stress and sleepless nights.

Instead of feeling worried all the time, choose the best strategy to return every single cent you’ve borrowed.

Ask a professional for help if necessary!