As unprofessional as it may seem, there are a few things you can do to help cope with your mounting debt.
A lot of people in the UAE are facing debt right now, and if you’re one of them, you don’t need anyone to tell you that you’re stressed out. But, you’re also probably looking for ways to deal with your credit card debt.
You’re not alone, and you don’t need to be ashamed of your financial situation. However, the best way to deal with it is to recognize the problem and to deal with it. The first step is identifying what’s caused it. Is it credit card debt, or are you stressed about other reasons? If it’s credit card debt, that’s a problem that isn’t going to go away on its own. You need to take action. The easiest step you can take is to talk to your creditors.
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If you’re finding it hard to make your minimum monthly payments on credit card balances, there are ways to help lower the amount you owe and/or the amount of interest you’re accruing on the debt. While there is no easy solution for high debt, it is possible to make changes in your spending habits in order to get your finances back on track.
The only long-term solution is to correct your spending habits. Financial counselors and senior education officers advices.
If you want to succeed financially, you need to stick to a budget. You can’t keep spending more than you make – that’s a recipe for disaster. If you have credit card debt, you need to get your expenses below your income level so that you can start paying off the balance. Interest charges will make it hard to get ahead if you don’t.
Aspects to Controll The Spending
There are two key aspects to controlling your spending: not using your credit cards and writing a sustainable budget that includes paying off card balances. If you can do those things, you’ll be on your way to financial success.
Financial counselors suggest that people cut up all but one of their credit cards as a first step to controlling their spending. It’s important not to cancel any accounts because your credit score will suffer. Use the card only for purchases that you are able to repay at the end of the month.
On the financial front, you will need to make some sacrifices in order to start reducing your debt balances. This may mean downsizing your house or apartment, selling your car, or cooking more meals at home.
It is essential that you create a budget that details all of your expenses and income so that you can determine where you need to cut spending in order to pay off your debt.
The Repayment Models
When it comes to repaying debts, there are two common repayment models.
The first – called the snowball method – prioritizes paying off smaller debt balances first to give consumers some momentum. The idea is to pay the minimum amounts on all debt balances to avoid late fees or higher interest charges, then apply the remainder of your payment to your smaller debt balance.
Once that balance is paid off, you can move on to the next smaller balance.
This strategy can help you become debt-free more quickly than if you only made the minimum payments on all of your debts.
The next one is the Avalanche method – from the highest rate to the lowest – will save you the most on interest charges.If you don’t need the positive reinforcement, you can focus on the debt with the highest interest rate first.
There are other steps you can take to reduce the amount you owe or lower the interest you’re charged. Here are four actions to consider:
- Explain to your credit card company that you are struggling to make payments on your current balance. Ask if there is any way they can lower the amount you owe or the interest rate on the debt. Credit card companies want to get paid and they may be willing to work with you to make sure that happens.
- Credit card balance transfers to other cards that offer no interest for a period may make sense, but they are not free. They may offer 0% interest for six or 12 months, but they usually charge 3% to 4% of the balance up front.
- Consolidating your high-interest credit card debt and paying it off with a lower-rate personal loan can significantly lower your interest costs.
7 Ways by You Can Pay Off your Credit Card Debts
Make a note of all the debts to be paid:
Instead of looking at your credit card bill at once, which is a lot, break it down into smaller parts. This helps you to categorize it. If you hold more than one credit card, it is advisable to pay off the bill which is on priority.
It is advised that you pay the credit card bill which has a higher rate of interest rather than the one which has a higher amount. This will save you from paying a large sum of money due to accumulated interest in the coming months.
If you think, only paying the minimum amount dues helps you to keep it aside for the time being, think again as this might affect your credit report and score. Banks will keep a track of your activity and if they see that you are being a reckless spender, they might suspend your credit card.
Paying the card bill with the least balance
Once you pay off the credit card bill with the higher interest rate, you can switch to the card with the least balance pending.
This completely depends on what bills have accumulated and on which card. It might not always be this way. Sometimes, the bill which is the lowest might be with the card which has the highest balance. In that way, you are clearing off two important bills.
Once you are done with clearing the credit card with the highest interest, you can shift to the bill which has the least pending balance. Paying this provides you with a much-needed mental boost of clearing the rest of the bills.
Getting a credit card with low APR
You can hold two credit cards, the balance of the credit card with a higher rate of interest can be transferred to the one with a lower interest rate. In this way, you save a large portion of money on interest.
Converting outstanding bill to EMIs
If nothing else, you can always visit your bank branch and request to convert your outstanding credit card bill into EMIs.
Most banks charge a nominal interest rate for these EMIs with a specified tenure option. These EMIs can be deposited directly at the bank branch, with a cheque or can be deducted directly from your account with the automatic payment facility of the bank.
Paying off your bills on a regular basis
This is advice for the future. It is always better to make sure you make a budget for your credit card and make purchases based on that budget. In that way, you can pay off your bill in full without carrying it forward to the next month or getting stuck in a debt cycle.