Posts Tagged ‘debt advice’

Blog Carnival Roundup

Sunday, February 1st, 2009

Here’s a list of some of the interesting blog carnivals from last week:

Bankruptcy and Debt Carnival

Carnival of Debt Reduction

Rich Life Carnival

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Call About Rates

Monday, January 26th, 2009

This week we feature advice on what to do the first week that you decide to get out of debt. Some of the activities you should consider doing right off the bat are things that are not too time-consuming and can make a large impact on your debt moving forward.

Step One: Contact Your Credit Card Issuers About Having Your Interest Rates Lowered

Contacting your credit card companies is straightforward and easy. Here’s the step-by-step process:

1. Amass all of your credit cards. This includes those that do not sit in your wallet and ones for which you may not even have an outstanding balance.

2. Find out your outstanding balances on each card, the current interest rate on the card, the contact phone number (usually listed on the back of the card), and your credit score. Pulling your credit score from each of the three major ratings agencies (Experian, Transunion, Equifax) is free once per year.

3. Brainstorm and write down as many reasons that you can think that you should have your rates lowered. Some of the reasons might include:

  • Good payment history
  • Proven ability to meet payment deadlines, even if just the minimum payment is made
  • Long credit history with the particular lender
  • Significant transactions made on the card, either one-time purchases or consistent spending with the card over time.
  • Good credit score
  • Unsatisfied service from the credit card currently or in the past
The secret to the credit lending industry is that they are faced with fierce competition to get customers signed up for their cards. But the issuer may not believe you fully understand your alternatives unless you present them over the phone in clear terms. This leads to the second step: quickly identifying your best alternatives to each of your current credit cards.
 
Step Two: What are your best alternatives?
 
To figure out your best alternative, research other card offers that you will qualify for. Write down all of the introductory rates that you will get were you to sign up for another card, the quick facts to any balance transfer programs that they offer, and the limit on the credit card that they are willing to offer you. An excellent database of different credit cards is at CardRatings.com. Then simply call up each credit card issuer and explain to them that you will do a full balance transfer to a new zero percent rate card at another lender unless they lower your interest rates. While this strategy should produce results, for some, this will not be adequate to convince the issuers to lower their rates. Then, consider pairing your battle to lower rates with an effective approach to eliminating debt: snowballing.
 
Combine with the Snowball Method
 
A creative way to combine your efforts to have your credit card interest rates reduced is to sync this approach with the snowball method. As you clear the balance on each credit card by snowballing your debt payments, that particular card with the new zero balance becomes your negotiating leverage. First, call the card issuer with the zero balance, explaining to them that you had been unsatisfied with service on it and as a result paid off the card entirely. Suggest to them that if they want your business moving forward, they offer you a much better interest rate on the card. Then specifically ask them what their company-wide base rate is for their cards. Once they tell you this, you can easily figure out a new interest rate for your card. Specifically, the issuer should be able to offer you a new rate equal to prime rate + issuer’s base rate. If this new rate is lower than your current rate on that card, then it might be a good option to take. If this doesn’t work, then just tell the credit card issuer your new interest rate on any of your zero balance transfer options and that to stop the transfer, their rates need to be lowered.
 
As you clear more and more balances with the snowball method, call up each of those issuers and run through the same discussion. For any future reduction efforts, your leverage is even higher, because you have not one but mulitple cards with a zero balance. Once you have several cards with new, reduced interest rates, any additional cards for which you want the interest rate lowered is easier to discuss since the suite of reduced-rate cards you hold will, in a sense, represent a market standard for what you should be offered in the first place. In short, while this approach may take some time, it is sure to pay off. Keep in mind that with this combined strategy, you will want to prioritize paying off the cards with the lowest balances first.
 
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Posted in Credit Card, Debt Management, Lending Industy, Paying Down Debt | View Comments

Advice, Tips, and Techniques to Eliminate Debt: Steps Two and Onwards

Wednesday, January 14th, 2009
Steps Two – Onwards

After getting organized and creating your basic plan, follow it up with solid execution. These additional tips can help make the progress towards paying off debt go much faster. Choose and implement any of the following:

  • Automate your debt payments, making sure that you keep your total payments at least as high as the amount needed to execute your payment plan.  Automating it makes it less likely that you reduce your payments and fail to reduce your debt.
  • Avoid eating out – it costs a ton
  • Create a budget for all of your non-debt expenses. Trim out everything but the bare minimums and turn that savings into direct payments towards your debt pay down.
  • Use free or low-cost recreational and entertainment options only. They are limitless and everywhere.
  • Build up a cash reserve for emergencies equal to three months of basic expenses: housing, food, and transportation.
  • Create a short-list of arguing points why your interest rates should be lowered. Next use the list as a script and call each of your lenders, haggling with them to have your rates lowered. If you aren’t getting anywhere with the level one representative, ask to speak to a manager, and repeat the same points.
  • Transfer your balance to a new credit card with a zero percent rate, then cut up the new zero percent card and never use it, turning the credit card into a credit tool. Shop around and find a zero percent balance transfer option that has the longest zero percent period available. Note the end date of the zero percent period and make that your deadline to have that account cleared.
  • Stop adding any new funds to investment accounts, retirement or otherwise, and apply those funds instead towards debt pay down.
  • Make a checklist of everything to review during your time paying down debt, then use the list to check your progress on the first of every month. Compare your outstanding debt amount at that point to what it was on the first of the previous month. Adjust your plans to make sure that steady progress is actually a fact.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Advice, Tips, and Techniques to Eliminate Debt: Step One

Tuesday, January 13th, 2009

The idea of getting ready to reduce and eliminate debt is enough to put most of us on edge. Those nervous about the tasks involved to step out of the red often put to us the question: “What are the best tips and advice for getting out of debt?” In a two-part article, we answer it here.

Step One: Get Organized and Make a Simple Plan                                                                          
Getting organized and coming up with a simple strategy is the first and most important step. In it, you don’t just bring together all of the various bank statements, payment stubs, and notices of changes to debt terms lying around the house; you’re actually writing down concrete and straightforward things that need to get some debt control. Only with a written plan can you effectively measure your progress towards debt elimination. Still confused and not sure where to begin?                                                                                                                                                                                
Here’s the broken-down steps to “Step One”:                                                                                                                                                                     
1. Collect all documentation you can find regarding your debt. Don’t pour over it yet; just pile it all into one place.                                                                                                                                                         
2. Take the pile and organize it in groups, according to type of debt (i.e., auto, credit card, housing/mortgage, etc.)                                                                                                                                               
3. Read through it to get a basic understanding of what is owed and to whom. On a separate notepad, jot down important things such as: the principle, the current debt balances, interest rates, whether the rate is variable or fixed, mandatory timelines for payment, minimum payment amounts to avoid additional fees, and any debt prepayment penalties. Also jot down the phone number(s) of the contact(s) for the account. Don’t worry about finding all of information; do your best and don’t be afraid to call the contact phone numbers for each of your lenders to fill in the blanks.                                                                                                                                                                                                               
4. Snowball Method: Within the mandatory guidelines for repayment you can choose between one of two basic strategies: pay off the smaller balances first, or pay off the balances with the higher interest rates first. Paying off the balances with the highest interest rates makes the most financial sense to pay less interest in the interim, but motivation-wise you might feel increasingly confident as you wipe out credit cards to zero balances. In this second case, the snowball method will be optimal:  it entails paying the minimum monthly payment on each of your debts, except the one with the lowest balance, where you apply all of the remaining funds you can dedicate towards debt reduction.                                                                                                                                                                                                           
5. Check your progress every month. Tell a friend, family member, or loved one about your plan and monthly targets so that they can keep you on track, like a coach. Be explicit and clear as to what is owed. Providing your coach something in writing will add to the sense of commitment.                                                      
Tomorrow we discuss step two: various quick and simple options to speed up the debt pay down process.                                                                                                                                                                                
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Posted in Credit Card, Debt Management, Paying Down Debt | View Comments