Small Business Resource

You can eliminate debt on your own if you tackle debts while they are still young. If debts are allowed to pile up, you will be drawn into a vicious cycle of debt that will make your finances go haywire. Often it is seen that debtors borrow from one lender to pay off another. Although they are able to stay current with their payments but the interest rate that they will be required to pay will be astronomical. So, borrowing from Peter to pay off Paul isn’t a wise move to make and it will only draw you into a vicious cycle of debt.

If you have multiple credit cards and you have lost track of their payments, it is time you take your finances seriously else debt collectors may chase you for their dues. So, what will be your first step to eliminate debt? You can take the following measures so that you are able to eliminate debt in a systematic and organized manner.

• Make a list of all your unsecured debts including credit card debts

• Make note of the interest rate each of your debt account attracts

• Plan out a budget. Write down your income that includes your paycheck or if you have rented out your premises. Make a note of expenses too. Prioritize your expenses. If there is an expense that can be deferred for a later period, do so. At the end of each month identify the expenses that can be curbed.

• There are 2 ways you can get rid of debts. One is by making payments for the debts that have the highest rate of interest and the other is by making payments for the debts that have the least outstanding balance.

• If you are finding it difficult to make payments for the debts that have higher rate of interest first, eliminate debt accounts that have lower outstanding balance.

• You are required to make a minimum payment each month. The minimum payment is a percentage of the outstanding balance. So, try to pay more than the minimum amount every month. In this way you will also pay off the principal amount. Since the minimum payment is calculated on your outstanding balance if you are able to lower the outstanding balance you will have to pay less as minimum payment.

• While you are taking your finances in your stride, keep aside few dollars that can help you to build your emergency fund. This is very important and due to unforeseen financial hardship if you are cash strapped, you will praise yourself for having saved cash for the rainy day.

If you follow the above mentioned steps, it won’t take much time to get out of debt. But it requires a lot of patience and perseverance and make sure you don’t deviate from your plan to eliminate debt. So, avoid taking on additional financial obligations by borrowing from Peter to pay off Paul. It adds to your existing debt load. But remember it is credit you are using and sooner or later you have to repay the cash.