The obvious way to clear off your balance on the credit card is to stop charging your cards and start making bigger payments each month until you eventually eliminates it altogether. But for a lot of people, that is the very last resort which will only be enforced when the apocalypse hits.
If you want some real methods to clear off your debts, here are 3 of them that have been tried and tested by many people. But there is one drawback. You have to be prepared to potentially take a hit on your own credit score that could last for years. It is up to you to decide what to do. Here are the 3 methods.
Get a lower interest rate through negotiation
The easiest way if to ask your lender for a lower rate. Most people think that this is next to impossible. I can tell you for a fact that it is not impossible. Just look at the thousands of people who have got the bank to do it. It is a reality and you should accept that fact and get out of the box you live in.
Banks don’t want to commence legal proceedings with anyone. It is bad publicity, time wasting, and a huge resource hog. The last thing they want is to take you to court for the amount you owe. So they are often receptive to debtors who approach them to find common grounds to solve the problem. And bearing in mind of the high interest associated with credit card, the lender will still be making a tidy profit if they as much as halve the interest for you.
Just be upfront. Call them at their hotlines and request for a lower rate. Tell them that you like them but they are not treating your fairly as you are aware that competitors are running promotions way better than what they have. It’s either they give you a discount or you will do a balance transfer to and take your business elsewhere. As banks do not really incur additional cost for keeping you or cutting you off, the decision to grant you the discount is really down to the mood of the product manager on that given day. If they keep you, they continue to profit from you. If they lose you, they lose the profit from you. No additional costs are incurred on both choices. So the pragmatic choice is obvious.
Balance transfers
I really don’t know when balance transfers came about. It just seems like one day, every lender started to advertise it, and bankers started to promote it religiously. It is a marketer’s dream product. Just transfer the outstanding balance you have on a credit card to a new card with another bank at zero percent interest. How can a pitch like that not be attractive for anyone who is already mired in debt.
The critical thing you have to take note is that interest free balance transfers usually only last for an initial period ranging from a month to a year. After which, the interest could even be higher than that of your previous card. They will also be an initial processing fee up to a certain percentage of the balance. Just be careful with your own calculations.
Home equity loans
In theory, home equity loans are one of the shrewdest ways to pay off or consolidate your debt. The concept is that you get a loan against your property at 1% and use that to repay the debts at 20%. It is basically a no-brainer.
But there is a trap if you are not careful or unclear of your objectives. Because bankers are remunerated partly from the amount of loan you draw down, they could constantly encourage you to get bigger loan for disbursement. It does make a lot of sense when interest is at 1%, most people will be able to generate a profit out of it.
And the sorry thing is that many people do take up the maximum loan they are eligible for. Leaving them with a stockpile of cheap cash sitting in the bank. An instinct of putting them to good use takes over. And before you know it, inexperienced investors are throwing their money at scammy investment schemes that over-promise and never deliver. The trendy types of legitimate scams these days are those companies that need money for developing a new technology of some sort promising a windfall from an IPO. The IPO never happens and the technology is forever in developme nt. The con-artist at the same time uses your investment funds to pay himself as the CEO. Before long, you are back to square one and this time, even deeper into debt.