I speak from bitter experience when I write this article, as I had to claw my way out to get out of card debt in the past. What I want to make clear is that it does not matter how much you have to repay, you must realise that there is a way to get out of serious, out of control debt. With a easy step by step process, I will show you how to negotiate credit debt and consolidate charge card debts, so that you will see clear progress. This is how I did it, and if it works for me it can work for you! I’ve broken it down into steps so it’s easy to follow.
Settle Debt – The Current Reality
Before you start the process to get out of debt, and attempt to settle credit card debts, it’s important to understand how it all happened, so you don’t get pushed straight back into debt again! During the period of low credit card and loan rates, most of us started using debt to consume stuff as it was cheap and easy. Many of us even bought investments which we thought would go up in value, and that helped to push us into debt. Now we’re stuck and need to get out of credit card debt and desperately need to settle credit card debt.
The Cure to Get Out of Debt Slavery & How to SUPERCHARGE your debt repayments!
Mindset change Needed to Get Out of Card Debt
First of all, you have to change your mind set. there is no point getting out of debt just to get back in again, so you are going to have to change the way you do things!
The Golden Rules to Get Out Of Card Debt:
1) Do not use debt for things you consume.
2) Use debt only for investing in assets that genuinely produce an income.
I say that again: Do not use debt for things you consume. Use debt only for investing in assets that genuinely produce an income.
You need to stop living on debt money and start living on income money, other wise you’ll get back into debt. But how you say, you’re in serious debt know and your income is smaller than your monthly commitments and you’re desperately trying to settle credit cards debts and getting nowhere. Keep reading – I reveal how here.
The reason you got into debt is you spent more than you earned, so you need to change that, by either earning more or spending less or both. I’ve written a special section on how to SUPERCHARGE your debt repayment, to kill it in LESS TIME. More on that under supercharge your debt busting.
Cut your cards through, but don’t cut them into pieces, you’re going to need the details when calling the companies.
Before anything else, open a spreadsheet and list all the debts you have, name of the card and with which bank. Next to that list the interest rate and how much you pay them monthly.
If you don’t know the interest rate call up the bank and find out. Arrange them from highest rate to lowest rate, in priority repayment order you could say, and list your credit limit and the outstanding balance. Also list what you spend for your monthly budget on rent, food, utilities, etc You need to know this to budget. The reason you’re doing this is to get in control of exactly where you stand. If you’ve done this and your budget shows you that your cashflow leaves something over each month, then that’s a good place to be in.
If your budget shows that you are short every month, then you need to work on reducing your monthly outgoings and/or increase your income. But that will be dealt with in another article.
Add all you credit card and loan monthly payment amounts up and all your monthly budget amounts up. Take your income and minus the amount. If you have nothing left after this or the figure is negative, you need to do 2 things. You need to access more income, you need to reduce the amount you spend without reducing your quality of life. Yes this is completely possible, I show you how to reduce spend not quality here. See SUPERCHARGE your debt repayments.
Call all your credit card companies but don’t use their premium rate numbers! If you’re in the United Kingdom, look at saynoto0870 for landline numbers. Call your card companies, and tell them you have been a loyal customer for x number of years and ask them politely “how much of a debt reduction you can offer me”.
Use those words; don’t say “can you” don’t allow them to say no, phrase it in a way they can easily say yes to! This is how you negotiate credit card debt, you check whether they can offer you a reduced rate on your existing debt. If they ask if you’re in financial difficulties, tell them no, but that you’re streamlining your financial accounts and tidying up.
Do a credit check on yourself. This is a vital step to get out of credit card debt, so that you can see exactly where you stand financially, and to see what information is being held. Take one of those free credit checks or free credit reports. Just remember to set up a reminder to yourself to email you from your gmail/hotmail calendar, in order to cancel it before the free period ends. You can always to do this again in 3 months time with another company to get an update. Read the small print! If you’re in the UK, checkmyfile is great.
If you’re missing payments and are actually fall short on what you need for your monthly cashflow, then you need to set the direct debit payments to the minimum. If you have something over each month, then you’re already in a better position to get out of debt.
In order to consolidate credit card debts, apply for 0% credit cards that allow you to do balance transfers. Check which ones have the longest period and smallest balance transfer fee. See my article on magic tricks with credit cards for more information on this process.
Transfer as much debt as possible to the credit card that has the lowest interest rate, or get a personal loan from a bank at a lower rate to consolidate credit card debt. Work out how much the repayments are going to be and make sure you include it in your budget. Budget how much you can afford to repay. Set all the credit card repayments onto the minimum amount. Then if you have extra cashflow each month, because of the reduced interest, start to overpay the cards.
Now, there are 2 ways you can do this. You can choose to target the highest rate card first, or the one with the smallest outstanding balance. It all depends on which strategy will give you the biggest feeling of control once you’ve paid it off. For me fortunately the smaller were at the highest rates so I just started overpaying those. Set up a seperate automatic payment from your bank account, to make this overpayment easy. It doesn’t matter if it’s just £1 extra a month, it is still helping you get out of credit card debt.