Pastor and TV preacher John Avanzini offers practical stragegies for people to emerge from their unending web of debt, arguing that God does not want people to incur debt or remain there.
Pastor and TV preacher John Avanzini offers practical stragegies for people to emerge from their unending web of debt, arguing that God does not want people to incur debt or remain there.
These days it seems there are almost as many debt reduction plans as there are different ways to get into debt in the first place. So which debt reduction plan is the right one for you?
Trying to reduce your debts by using the method or system that worked for a friend is pointless. This is because their debt levels and income levels will not be the same as yours, so how can a plan that worked for them possibly work for you in the same way?
It’s important that you find the right debt reduction plans to suit your own income, your own levels of debt, your credit history and your unique financial circumstances
You could decide to use the snowball method, or try paying off the debts with the highest interest first. You could decide to try debt consolidation to roll your outstanding balances into a new debt that you have to pay off or you might even consider debt settlement options to try and get rid of your debts completely.
Despite the type of debt reduction plans you choose, there are some things that hold true for all of them. In order for you to reduce your debt and regain control of your financial situation then here are some things you will need to think about to make your debt reduction plans work positively.
No More Debt
The most effective debt reduction plans are those that actively help to lower your balances. This means you need to stop charging things to your credit cards immediately and don’t be tempted to apply for credit anywhere else. The object is to regain control of your money, not continue to increase your debt.
Payment Reductions
You might have noticed that the minimum repayment amounts on most credit card bills are different each month. This is because credit card interest is charged on the balance you owe each month. This means that as your balance reduces, you’ll notice your payments begin reducing too.
If you have any accounts with payments that change each month or begin to look like they’re getting lower, then ignore the minimun payment amounts. Continue paying the same amount you were paying when your balance was higher. This tactic will help you’ll pay off your balance much faster and save you thousands in interest charges.
More Than Minimum Payments
Never be tempted to pay just the minimum payment shown on your accounts. To really make debt reduction plans work for you and get out of debt for good, you’ll need to find a way to pay more than the minimum payment shown on your statement each month.
Budget Breakdown
Nobody likes the word ‘budget’ but in this case consider breaking down your budget into smaller sections. Most people make their credit card payments or personal loan payments once a month.
Instead, try breaking down your payments to match your pay periods. Most people are paid every second week these days, so divide your minimum monthly payment by 2 and pay this smaller amount each time you get paid. You’ll find it easier to stay focused on your debt reduction plans if you make the payments smaller and easier to manage.
Motivation
The problem with many debt reduction plans is that people lose motivation and fall back into their bad spending habits that got them into debt in the first place. Find ways to keep your motivation levels high.
Add up how much you’re paying in just repayments on consumer debts right now. When you look at the total figure you pay out every month in repaying debts, many people are a little shocked.
Imagine that you had no repayments to make and all that money was yours to spend every month. You would find it much easier to get by financially with that extra cash in your pocket, wouldn’t you?
Debt reduction plans should be designed to help you reduce your debt and free up the money you work so hard to earn each week. Always remind yourself of the benefits you’ll receive once you get rid of those debts and it will help to keep you motivated.
Many people believe that do it yourself debt deduction will be too hard for them. They start searching for easy ways to get rid of their debts or they’ll aim at options that could end up getting them in even more debt rather than reducing their balances.
Do It Yourself Debt Reduction can be quite simple. If you’re determined to regain control of your finances, then you need to find some discipline and then work towards a specific plan of attack. If you stick to your plan, you’ll be debt free. It really is that easy.
Here’s an easy do it yourself debt reduction plan you can work on. Remember, this is your debt and your income, so you should always work towards creating a plan that is comfortable for you and your unique financial situation.
No More Debt
The aim here is to reduce your debt levels, not add to them, so it’s important to stop adding to your balances right now. This means stop spending on credit. Don’t apply for any more credit. If you have bills that need to be paid or you see things that you want to purchase, then find other ways to pay for them. Don’t use any more credit.
Reduce Costs
Most people start to tighten their belts automatically when times get tough financially. Unfortunately, most people work on reducing costs in the wrong areas that really don’t have that much effect. Cutting back on your grocery bill is helpful, but you could find that reducing the amount you repay on debts each month saves you far more money.
Work on ways to reduce your bigger costs. Try to find ways to reduce how much you pay each month on your repayments. If you catch up any past due payments you won’t be paying penalty interest so you could find your payments are reduced. Think carefully about balance transfers and switch your debts to lenders that charge lower interest rates.
Calculate whether a debt consolidation loan can save you any money or not. While they might reduce your repayments a little, the risk is that you may increase your total debt balance as a result. Search for insurance products that might charge a less for similar policy types.
Prioritize
If you didn’t have to make the repayments every month on all your debts, how much extra cash would you have at the end of each month? Most people are shocked to see the total amount of money they spend on debt repayments. Imagine having that same amount of cash to spend how you want out of your pay check every month instead of giving it to a bank.
The next time you think about charging something to your credit card, ask yourself if that same money could go towards getting rid of a debt somewhere else. When your next pay check arrives, separate your money out carefully towards paying your bills and repayments first. If you have money left over after your bills are paid is yours to spend on other things.
If you have no money left over after paying for bills, expenses and repayments, then you’re in serious hot water and it’s time you took a careful look at your spending habits.
Create a Do It Yourself Debt Reduction Plan
Write down how much you owe your current debts. Beside the balance figure, write down how much you have to pay each month in repayments. Then write down how much interest you’re being charged.
When you list them down this way you can see easily which one is costing you the most in interest charges. The most expensive debt with the highest interest charges is the one you attack first. Start working towards reducing the balance of this debt whenever you can. You might not think that an extra dollar on a repayment will help, but it can seriously add up to quite a big saving in interest charges in the long term.
If you don’t have any excess cash from your pay checks to even find an extra dollar, then have a yard sale or open an eBay account and spring clean the garage to find things you don’t need any more. Get a part-time job temporarily. Figure out ways to generate a little bit of extra income online.
No matter what you decide to do to increase your income even a little bit, you need to find ways to get your debt balances down. When your most expensive debt is paid off, put the money you were paying off that first debt onto the payment you already make on the next debt in line.
Do it yourself debt reduction shouldn’t have to be difficult, but you will need to find some discipline to make it work. If you’re serious about finding ways to reduce your debts, then sit down and work through a realistic plan of attack and then make it happen.
You might have already heard that biweekly payments can seriously help you to pay off your mortgage faster, but do you understand how they work? You could pay a company huge fees to show you, or you could take a moment to see how they work for yourself.
After all, it’s your money so learning to take control of it yourself will be the best thing you ever did for yourself. You’ll find that it’s easier to budget each week and you’ll notice your mortgage balance reducing faster than you thought by simply doing one small thing a bit differently.
How Biweekly Payments Are Calculated
Grab your mortgage statement and check how much your minimum payment is each month. This is the ‘amortized’ payment, which was calculated by the bank to pay back a bit of your balance and a lot of their interest.
This figure is also the minimum possible payment you need to make in order to make your mortgage stretch out for the longest possible period of time. If you pay only the minimum amount once a month, then you will pay out your mortgage balance only at the very end of the full loan term.
Let’s cut down some of the bank’s profits and re-calculate this payment so it’s in your favor instead of theirs.
Here’s an example of a biweekly mortgage payment calculation:
If your mortgage payment was $1,000 per month, then by the end of the year you’ll pay exactly 12 payments over that time. This adds up to $12,000. Simple, right?
No matter what your mortgage payment is, divide it by 2. If your monthly payment is $1,000, then you’ll divide this by two and end up with a biweekly figure of $500. This means you’re going to pay half your mortgage payment every second week on the same day.
What is Biweekly?
Biweekly simply means ‘every 14 days’ and is the same period of time as fortnightly. It does NOT mean twice a month. It means that if you get paid every second Thursday, then you make your newly calculated payment on every second Thursday.
This is an important distinction to make.
How Do Biweekly Payments Reduce Your Mortgage?
If you only make your new biweekly mortgage payment twice a month, then by the end of the year you would have made 24 half-payments, which is exactly the same as 12 monthly payments. You’re having no effect on paying off your mortgage at all.
However, if you pay your new biweekly mortgage payment on the same day every second week, then by the end of the year you would have made 26 payments instead of 24.
This puts you one entire payment ahead every year.
What Else Can Biweekly Mortgage Payments Do For You?
On top of being ahead on your mortgage all the time, you’re also able to reduce the amount of interest you’re being charged on your loan. When banks calculate your interest charges, they work out how much interest you owe them based on your mortgage’s balance at midnight EVERY day.
Then they add up what they’ve charged you and show you one simple figure at the end of the month.
By paying biweekly, your balance actually drops by that little bit of money every 14 days. This reduces the balance, which in turn reduces the amount of interest the bank can charge you at the end of the month.
If you’ve had difficulties with applying for a traditional credit card, then perhaps consider applying for a prepaid credit card as a way to begin building your credit.
Prepaid credit cards are still backed by the major credit card companies, which means you’ll have the security of a traditional card. You don’t have to worry about credit checks or employment checks because you’re not borrowing any money. The credit card company knows you can only spend money that has already been prepaid, there are no issues with affordability or previous repayment history.
Using a prepaid credit card means you have an interest free way to access the benefits of using a credit card to pay your bills and make your purchases but you won’t be increasing your debt levels. You could also benefit from knowing your payments may also be reported to the credit bureaus, which you could be increasing your credit score slowly as well.
Be sure to do your research before you apply for your card because you will want one that will report your payments to a credit bureau so you could benefit from better credit. Not all companies offering prepaid cards choose to report your speding activity, so be sure to choose one that does.
Operating your prepaid credit card is not really much different to a traditional credit card. The primary difference of course is that you’re not increasing your debt levels by spending the bank’s money. You use your own money to prepay the account and then pay your bills using your card.
You will receive statements to show your account usage at the end of each month, so you have the option of showing your statements and reporting any bill payments or loan repayments to a credit reporting bureau so you can begin to improve your score without being charged any interest fees spending on your credit card.
The biggest benefit for anyone with bad credit is that you’re not increasing your debt and you won’t be charged interest on the things you purchase. Remember, the money on your prepaid card is your own money.
Your prepaid credit card is just an account with a visa or mastercard capacity that only uses funds that you deposit into it before you go shopping.
One of the greatest advantages of this type of card is that you’re forced to learn to be more responsible with your spending habits. Because you can’t purchase things unless you’ve managed to deposit money into your account first, it also teaches you to control your finances better as well.
Learning responsible budgeting practices is a great way to avoid getting stuck in the bad credit cycle again in future. Because you’re learning to watch how much you spend and be careful about how much money you put aside for shopping trips, you’re learning to allocate money for priorities instead of buying things you don’t really need on impulse. This begins to build positive spending habits rather than putting you further into debt.
When it comes to choosing the right mortgage, how can you know you’re getting the best deal available to you?
No matter what advertising hype you’ve seen and no matter what ha worked well for your friends or family, there is no such thing as the best mortgage. There is only the right mortgage for you.
The reason is that no one else has the same financial situation as yours. Your income and your expenses are unique to you. Your spending habits and your repayments are also not the same as anyone else’s, so why would you do the same things they’re doing?
After all, the really low interest rate you saw advertised or heard about from a friend might sound ideal, but you might not qualify for it. Or you might discover that even though the rate is really low, they might have hidden fees and charges that make your costs even higher than going for other options.
How Do You Find the Right Mortgage?
The key to finding the right mortgage to suit your unique financial circumstances is to look carefully at your current income and your current expenses. Then consider what your future plans are going to be.
If you know you’re going to sell the house and move in a couple of years, then always double check what the exit fees will be on the mortgage you choose.
If your credit score is a little low right now, then perhaps shop around and compare the difference between paying more for interest rates and less for a house now. Then look at how much those numbers change when you take 6 months to increase your credit score. You might get a lower interest rate then, but will you be paying more for the house you want?
If you know you’re going to borrow using two incomes to meet mortgage servicing levels, but you know you want to start a family soon, then consider using only one income to work out your borrowings. This way you won’t struggle later.
Some people are attracted to the really low introductory rates the banks advertise. If your income only just covers these introductory rates, have you considered how you’ll afford the repayments once they adjust over to regular rates? If you’re unable to refinance in the future then you could face a lot of stress and trouble when this happens.
Who’s Selling You Your Mortgage?
When it comes to finding the right mortgage, most people simply go to their local bank branch or they call a mortgage broker. Your bank can only offer you the lending products they have available. They can’t offer you the great deal you saw across town from another bank.
Mortgage brokers are licensed to sell financial products from a wide range of banks. This does give you a lot more choice, which increases your chances of finding the right mortgage. Always remember that mortgage brokers are paid for selling you a lending product, regardless of which one you get.
It’s important to check that you’re really getting the right mortgage for you. The best way to do this is to ask plenty of questions. Be prepared with a list of things you want to know and be sure you get the answers you want.
Mortgage offset accounts are not very commonly offered by American banks as yet, but banks across Europe and Australia have been offering these amazingly flexible loan types for several years. With enough demand, it’s possible American banks could begin offering these in order to help their customers to repay debt more quickly.
When used correctly, it’s possible to repay an average mortgage very quickly. However, if used incorrectly it’s equally possible to cost yourself a lot of money and time. You should always take time to completely understand how a mortgage offset account works and how it can benefit you before you apply for one.
An offset account is nothing more than a savings account that is linked to your mortgage account. You are encouraged to leave your savings in your account for as long as possible. At the end of each month, the bank calculates the interest due on your mortgage balance and then deducts from your balance the amount you’ve left in your savings account.
Effectively this can mean quite large savings on your interest bill each month.
How Does a Mortgage Offset Account Work?
The mortgage portion of your mortgage offset account is nothing more complicated than a regular principal and interest loan. Every repayment you make is made up of an interest portion and a principal portion. You still make your repayments the same way as your normal mortgage.
The primary difference is that you have a linked savings account offsetting against your mortgage balance.
If you have a mortgage balance of $150,000 and you have $5,000 in your offset savings account, then you will be charged interest on $145,000. This means the more money you save, the less your interest bill will be at the end of each month.
When you look at the percentage of your monthly mortgage repayment that repays your balance and the percentage that pays the bank’s interest, you’ll quickly realize that only a small amount of your money is actually repaying your loan.
Reducing the amount of interest you’re charged each month means that a higher percentage of your monthly mortgage repayment is then going towards the principal or balance of your loan, which pays it off faster.
Can I Repay My Mortgage Even Faster?
If you know you’re able to be disciplined with your money, then there is a way to use a mortgage offset account to really speed up your mortgage reduction plan. Please be aware that this method does require discipline, budgeting and awareness of what you’re spending at all times, otherwise it won’t work!
The bank that holds your mortgage offset account should also offer a credit card that has an interest-free period. For the purpose of this example, we’ll assume you have a 30 day interest free period.
You then ask your pay-master to put all your salary into your savings offset account every month and leave it there untouched for the entire month. This means you have as much money as possible offsetting against your mortgage for the longest possible time, so it’s reducing your interest bill.
During that month you use your 30 day interest period on your credit card to pay all your bills and expenses. Don’t use the cash-advance option on your credit card or you’ll end up being charged interest on the full amount owing immediately.
At the end of the month before you can get charged any interest, you repay your credit card balance from the amount still sitting in your offset account. Your mortgage interest is charged at a lower rate and your mortgage repayment is made. Instead of only a small percentage of your payment repaying your principal, a larger portion is now chipping away at your loan balance for you.
What Could Go Wrong With a Mortgage Offset Account?
While the structure of these loans seems very simple, running them properly can be a quite advanced banking strategy. The biggest problem customers have is not being able to control the amount they spend on their credit card each month.
If you’re the type of person who is likely to spend more money on credit than you earn, then you’ll find that you’re paying high interest on your credit card, not have enough savings in your offset account to cover the payment and then you’re having no effect on your mortgage at all.
In some cases, it’s possible to max out your credit card, empty your offset account and miss your mortgage payment completely! This is why it’s vitally important that you remain very disciplined with your finances when you decide to use a mortgage offset account.
One of the reasons for the old saying “the rich get richer and the poor get poorer” is simply that the rich know how to use more advanced banking products to their advantage. This saves them money, repays their debts quickly and lowers their total interest costs every month.
Where Do You Find a Mortgage Offset Account?
While there are not many American banks offering these more advanced financial products yet, there are several large European and Australian banks starting to introduce them for customers in the US.
Ask a qualified mortgage professional to find out more information about a mortgage offset account for you if you’re curious to learn more.
Are you in a situation where youve charged too much on your credit cards and are now struggling to find a way to meet all the payments each month?
Youre not alone. Thousands of Americans are in the same situation.
Dont give up and think youve gotten in too deep with your financial troubles. There are some great ways to help you reduce your credit card debt and get you back on track.
Credit Card Debt Consolidation
There are banks willing to roll your credit card balances over to a debt consolidation personal loan. Not only will you get rid of all those credit cards and the high interest charges that go with them, but youll only have to worry about one repayment each month.
Your new personal loan will have a lower interest rate than your previous credit cards had, so youll be saving money on interest and your repayments will also be much lower.
Check Your Spending
You might be able to go over your current spending habits and see what you can cut back on to try and save a little extra money to put toward reducing your credit card debt. Even small savings out of your regular spending can save you thousands of dollars in interest payments, so never think even little amounts are too small. They all add up!
Unwanted Items
Spring clean your house or garage and see what you might be able to put up on eBay or sell in a yard sale. Youll be surprised at what people are willing to buy. Just because you think something might not be worth much money, someone else might think its just what theyve been searching for.
You might not make much money, but even a couple hundred dollars is better paid off your debts than sitting unused in your closet or garage.
Downsize
When financial times are good people tend to buy more expensive items than they really need. Consider trading that expensive car sitting in the drive for something more economical. A smaller car could mean lower repayments which makes your budget a little easier each month.
Debt Settlement
If youre already in over your head and the banks wont help you to consolidate your credit card debt, you could consider debt settlement or debt negotiation.
A professional debt settlement company might be able to help you to negotiate your outstanding debts and try to work out payment options with your current bank or lender. They may also be able to negotiate for lower interest charges on your behalf.
Always check that the company you deal with is registered with the BBB.
Reducing credit card debt is often something people avoid thinking about, believing its too hard or too difficult. You really can speed up your credit card debt reduction plan by facing the truth and beginning your plan today.
With just a little discipline and some focus you really can start to wipe out your credit card debt by using even small tips like these.
1) Know Your Current Credit Score
Without knowing your precise starting point youll find it hard to know exactly how much youll need to improve your score. Order a copy of your credit report from one of the three major credit bureaus and find out your exact starting score. You might even find that your score is higher than you thought.
2) Repair Credit Errors
Did you know you can legally dispute any wrongful errors listed on your credit report - and youre allowed to dispute these yourself. You dont need to pay expensive fees for credit repair companies to remove these for you.
Search the internet for “credit repair letter templates” and then write to the credit bureaus yourself.
3) Negotiate
If youre all ready behind on any payments or bills, then dont be afraid to call your lender or credit company. Ask them if you can negotiate for extended payment dates and discuss ways to reduce your payment costs by either finding about about lower interest options or refinancing and consolidating to help make meeting payments easier.
4) No More Credit
If youre trying to improve your credit score then dont apply for any more credit and dont keep using the credit cards you already have.
If you can show a positive reduction on your existing balances - even if its only a few dollars a week - then your score will gradually increase as your total debt to credit ratio will begin to improve.
No more credit!
5) Pay Off Outstanding Debts
Youll be surprised how willing most credit companies and banks can be when you call and discuss positive options. They do understand that everyone has moments where we all fall behind and they will be happy that you””””re trying to catch up.
6) Arrange Payment Plans
There is absolutely no point in offering to pay off your past debts at $1,000 a week if you know you cant keep up those payments. Make sure you arrange for realistic payment plans that fit into your budget are will be manageable to keep up with.
7) Create New Spending Habits
If youre looking for ways to repair bad credit then obviously repeating your spending habits from the past are only going to get you into deeper financial trouble.
Learn to allocate the money you receive from your pay check each week a little differently. Prioritize your repayments and your bills and make sure youre keeping up with the important things. The longer you keep up a great repayment history, the higher your credit score will be bumped up over time.
Professional Assistance
If youve reached the point where your credit is already too bad to consider simple credit repair tactics, then maybe its time to seek professional help.
Professional credit counselors and debt management companies can help you to work around your existing issues and get you back on track.
Never be ashamed to ask for help. Listen to what advice the professionals can offer and make sure you act on that advice.
The seemingly impossible task of paying off mountains of debts is enough to make a lot of people bury their heads in the sand and ignore the problem. Many people believe it can’t be done on their incomes or that their debts are simply too high.
Don’t give up hope. Debt reduction really can be a lot easier than you think as long as you know how to do it!
Debt Reduction Step One
Add up all your the income that comes into the household each week. It’s important to have an accurate figure as to how much cash you have to work with in order to create your debt reduction plan.
Always work your bill payments around when your income arrives - so if you get paid weekly then work out the rest of your plan on a weekly basis. If you get paid monthly, then work on monthly figures.
Add it all together and write down the total amount of income that comes into your household.
Debt Reduction Step Two
Tally up all your oustanding debts and write them down on a piece of paper. Beside each figure write down the amount of interest you’re being charged for every balance.
Then write down the minimum monthly repayment the bank, lending company or credit company is expecting you to pay. Add up how much your minimum repayments come to.
Don’t be tempted to add up the total of your outstanding balances yet. Just add up what your total monthly payments are for now.
Debt Reduction Step Three
Look carefully at your total income figure and your total repayment figure. You’ll notice that no matter how hard you seem to struggle, your income should still be larger than your total amount of repayments. The difference between the two figures is the amount you have each pay period to pay for living expenses. Things like groceries, gas, electicity and water, insurances and just general daily living come out of this gap.
If the gap between your income and repayments is only very small, or even worse, if there is no gap, then you are in serious need of emergency debt reduction today. You will need to find a way to reduce the cost of your repayments and cut back on your everyday spending in order to make sure you’re not getting into even deeper financial trouble.
Debt Reduction Step Four
In an earlier step you should have written down the interest rates you’re being charged on your outstanding debt balances. Beginning with the highest interest rate being charged, call your lender or credit company and see if they’ll negotiate to lower your current interest rates.
If they won’t agree to cut your rates then shop around and compare other lenders to see if any are willing to offer cheaper rates on balance transfers.
Some people may find they’re unable to transfer balances to other lenders offering those great low rates. If this happens, consider a debt consolidation personal loan and roll your balances together into this loan. You’ll find that a debt consolidation loan will be charged at a much lower interest rate than most credit cards, so you should have extra money left at the end of each month or pay period.
Debt Reduction Step Five
Reduce your payments on all your debts right down to the minimum payments your creditors are asking for. This sounds like backwards logic but there’s a reason behind the seeming madness.
If you get paid weekly, divide each of your minimum monthly repayments by 4. Just use a regular calculator and don’t change the calculations. Just look at what your creditor wants you to pay each month and divide by 4. This is the new amount you’ll be paying every week instead of each month.
Credit cards charge interest on your balance daily but don’t show your interest charges until the end of each month. When you pay monthly this gives the credit card company a chance to charge compounding interest on any interest they’ve already charged you for 30 days.
By paying weekly instead of monthly you’ll be able to reduce the compounding interest effect from leaving your balance untouched. Instead your balance is being slowly chipped away every 7 days.
Your interest charges will become slightly lower every month because of this effect, which saves you money and helps to reduce debt even faster.
Debt Reduction Step Six
Begin with your smallest outstanding debt. This should be the loan or credit card with the lowest balance left to pay off.
Focus on this debt first. This will be the first debt you’ll work on clearing completely.
You should already be paying only the minimum monthly payment on every one of your outstanding debts but every payment will now be made weekly instead.
There is a reason for focusing on the smallest debt first rather than the one with the highest interest rate. It’s because most people need the encouragement and feeling of accomplishment you’ll feel when you pay off your first debt on your own.
When you’ve paid off that first debt, repeat the process on the next outstanding debt. You should already be paying this debt weekly as we went through in a previous step.
Take the amount of your payment from the first debt you already paid off. Add this amount to your minimum weekly payment on the next debt in line.
You’ll be surprised how quickly you’ll reduce debt by restructuring your budget and your repayments just a little bit.
