Try these debt reduction solutions

Incurring a debt is easy, but managing a debt is not. It requires great financial discipline and knowledge of debt reduction solutions to do so. One solution that is favored by all counselors is to shift to debit cards. Once you do so you can spend only that much which is available in your account. The question of incurring fresh debt will not arise.

The second, and relatively easier, measure is to reduce the number of credit cards that you own. This can be done by taking a sharp pair of scissors and cutting all credit cards, one by one. You can always retain one credit card for use in an emergency. However, this credit card should be the one that charges the lowest rate of interest. These two steps – reducing credit cards and obtaining a debit card -- will cut down your wasteful spending sharply. You will then have a little more disposable income to clear your debts.

Your third step should be to transfer your credit card balances to the card that you have retained. When you do so, you will lower the interest on your cumulative repayments. This is because some of the credit card companies charge as much as 21 per cent. You can even consider transferring all your balance to a card company that is offering a 0% balance transfer scheme. This will further reduce interest accumulation on your existing debt.

Those debtors who own a house can go for a home equity loan or take a fresh line of credit. There are two advantages of taking such a loan. The first is that this loan is available at interest rates that is much less than those charged by credit card providers. The second is that you make only one payment a month to the bank that has provided the loan. There is no fear of late fees or missing out on repayments or harassment by debt collectors.

Another possibility is taking a personal debt consolidation loan. This can be taken from banks, financial institutions or credit unions. The debt consolidation loan too works like a house loan and gives you the breathing space that you desperately need to reduce your debts.

Debtors who don’t want to take loans can consider selling ‘unnecessary’ objects lying in the house. These may include antiques, jewelry, furniture etc. The income that is so generated can be used to pay the debts. Debtors can even withdraw small sums from savings bank accounts that pay low interest to clear debt..

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