5 Ways to Spare Your Credit and Avoid Bankruptcy
Thursday, March 9, 2017, 6:00 PM | Leave Comment
Bankruptcy affords those in significant financial distress a clean start. However, the fact of bankruptcy remains on your credit history for up to a decade.
If you seek to avoid the harm to your credit and ability to buy a home or other major ticket items, consider these tips to suppress your debt burden.
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No Substitute for Cash
Relying on credit for staples and regular living expenses can unnecessarily increase your debt load.
Credit card debt should not pay for disposable items such as groceries or most restaurant trips.
When you turn to credit for these purchases, you face interest charges for items things with little or no repetitive use and that no longer exist.
Use cash or your checking account for electric, gas, water, garbage, cable and other regular monthly bills.
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Getting Financially Lean
If you find money tight, consider eliminating certain services.
For instance, consider removing data plans from your smartphone and tablets and using Wi-Fi at your home or at establishments that offer it free of charge.
Reduce monthly payments by downgrading or eliminating satellite or cable television or satellite packages, especially those with channels you don’t watch.
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Above and Beyond
Pay more than the minimum payment. Consumer Reports states that it would take you 24 years to wipe out a $2,000 balance on an 18-percent credit card if you paid only two percent per month.
Extra payments on small balance credit cards can reduce your interest outlays on especially high-interest cards.
Alternatively, devote extra amounts to the lower-balance accounts and reserve minimum payments for the high-balance cards.
Using tax refunds can make a significant dent in your debt. As you pay off cards, you’re credit score may increase because zero-balance accounts equate to more available credit.
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Home Equity Loan
With a home equity loan, you borrow against your home’s value, less what you already owe on it.
Using the home equity loan proceeds, you pay off existing credit cards, medical bills and other unsecured debt.
Further, the lower interest rate on a home equity loan replaces the higher interest rates on your credit cards.
However, a home equity loan effectively converts unsecured credit to a secured loan. If you miss payments, you could lose your home to foreclosure.
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Credit Counseling
Find a reputable credit counseling agency that can help examine your credit condition, negotiate for lower rates and consolidate your credit cards, student loans, medical bills and other unsecured debt.
In a debt management plan arranged through a credit counselor, you deposit an amount monthly with the agency. With your deposit, the agency pays these creditors according to a set plan. Depending on the plan or creditor, you may avoid late fees or interest.
Consult your state’s Attorney General’s office, a consumer protection organization or an agency on the United States Trustee Program’s approved pre-bankruptcy counseling list.
If bankruptcy is your last resort against mounting debt, contact an attorney like Lazaro Carvajal who can guide you through the procedures and requirements for getting your debt discharged.
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