Methods that can be helpful in eliminating debt.
This strategy seeks to minimize the amount of finance charges you pay during the process of eliminating debt. Before using this approach it’s best to close all retail store charge cards and cut them up, so you won’t be tempted to use them again because they charge you nearly twenty-five cents on the dollar in interest. At most, keep a low-interest visa type account for extreme emergencies, if you can truly be responsible by not charging anything more unless an extreme emergency occurs for which you simply have no cash to cover. However, after a year or so of disciplined debt repayment and saving in an emergency fund you should not be in this type of situation.
You should consolidate as much higher interest debt as possible onto this card so you can more quickly pay off your debts if the visa type card allows you to transfer other card balances and pay interest on them at rates lower than what you are currently paying on the retail store charge cards. If you’re prone to undisciplined spending and charging purchases you should apply for a low-interest closed-ended consolidation loan instead so whatever amount is paid off is not re-chargeable.
If you have equity in your house you may be able to consolidate credit card and other debt into a mortgage or home equity loan. Such loans usually charge much lower interest rates than would be charged by credit card companies. The interest you pay on these loans can generally be deducted on your federal tax returns to reduce the amount of taxes you would otherwise owe. If you decide to use these methods to help pay down your debt beware that the financial institution can start foreclosure proceedings on your home if you miss a payment. This could result in the loss of your home and equity that you’ve built up over many years. That is why it is not good in many instances to use home loans to pay off other consumer debt.
Each of these methods requires you to become and remain disciplined in spending and saving in order for them to work to benefit you. They are not for the faint of heart, rather they are for those who are resolute in their desire to be a godly steward of their money, eliminate their debt, and become debt-free. Such people are willing to make necessary sacrifices to help themselves reach this financial position. They will engage biblical financial principles such as tracking income and expenses, cutting spending, reading financial literature to learn more about how to properly manage, honoring God by giving to help spread the gospel and help others, and saving for rainy days and future purposes.
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Deuteronomy 28:12-14 and 43-45, Proverbs 22:7, Luke 16:8-9, Romans 13:8
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Published in: Personal Finance