It’s easy to get into credit debt, even when you have a good job and a 401K. The first step is admitting that there are problems with your current approach. It doesn’t have to be difficult or time-consuming–just follow these 5 rules:
1) Pay down the principal balance only; do not exceed 50% of what you owe
2) Limit monthly payments to 1/12th of the total amount owed
3) Make no more than 3 interest free payments in one year on any credit card payment over 12 months (e.g., $250 would allow for 9 interest free payments per year). This can vary by state law but it’s always better safe than sorry

The “5 ways to pay off credit card debt” is a blog post that offers 5 different methods on how to pay off credit card debt. The article also provides ideas on what to do instead of paying off your credit card debt.

Maintaining a revolving load on your credit card is not a wise use of plastic, but paying it off every month to earn rewards is. There are smart methods and foolish ways to pay off your credit card debt, just like any other endeavor.

According to recent statistics from the Federal Reserve Bank of New York, there is already more than $804 billion in credit card debt owed by all Americans. That works out to more than $6,281 per home among the 128 million in the United States. That loan has to be repaid in full.

Kitzcorner / istockphoto, source of the image.

1. Obtain a mortgage equity loan

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One method to pay off your high-interest credit card is by using your house as collateral, but are you prepared to take that chance? Your primary asset is your house. You may get the cash you need right now by taking out a home equity loan, but doing so puts your mortgage at danger of default. Don’t take a chance with your house if you’re having trouble paying off your credit cards. If you don’t pay back the loan, you’ll lose it.

DepositPhotos.com, source of the image.

2. Obtain a payday loan.

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Simply said, this is a horrible plan. You want to combine your debt, but doing so will end up costing you much more money overall. The typical interest rate on credit cards is above 18 percent. The usual APR for payday loans is 400%! In addition, fees are applied if you are unable to repay the loan.

Relif/Istockphoto credit for the image.

3. Put your vehicle title up as security for a loan

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You need a loan but can’t afford to pay off your credit cards, so you use the title to your automobile as collateral. What makes this a bad idea? Because the repo guy will come for your automobile if you are unable to pay it off. You’ll quickly find yourself in deeper trouble than when you initially had the notion since it makes it harder to commute to work.

DepositPhotos.com, source of the image.

4. Use up your 401k (k)

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You saved the money. You ought should be allowed to use it whatever you like. Not unless you want to incur a large early withdrawal penalty. You must pay taxes on the dispersed funds as well as a 10% penalty if you withdraw money from your 401(k) before the age of 59 and a half. Additionally, you’ll deprive yourself of money in the future when it becomes much tougher to continue working.

Unsplash / Raw Pixel, source of the image.

5. Use a life insurance policy as collateral for a loan

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If you don’t pay back what you borrow, interest will be applied. You run the danger of decreasing your family’s death benefit, which is often the main motivation for purchasing life insurance in the first place. If you don’t pay back the whole amount and your insurance expires, you can also be required to pay income taxes.

Now for the clever methods.

SolisImages/Istockphoto are the source of the image.

6. Pay off the credit card with the highest APR.

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The debt avalanche is the name of it. The credit card with the highest interest rate and often the lowest balance is the one you concentrate your repayment efforts on. The psychological and financial benefits of seeing your balance decrease make this strategy excellent. Interest is a fee that is added on top of the loaned funds.

Therefore, when you pay off that sum, it feels wonderful knowing that you did it while also avoiding paying interest. Then just go on to the card with the next highest rating and repeat. The debt repayment quickly grows from a little snowball into an avalanche.

Kitzcorner / istockphoto, source of the image.

7. Make two monthly payments.

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There are 26 half payments, or 13 monthly payments instead of 12, with 52 weeks in a year. This will increase your debt payback by two times, and seeing the sum go will keep you positive about your money.

fizkes/istockphoto is credit for the image.

8. Refinance your debt

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Some debtors decide to use a credit card with a 0% balance transfer fee to combine their credit card balances. To be eligible for that choice, though, you often need a better credit score.

Fortunately, there are charitable organizations that can help those with bad credit. Balance transfers on credit cards may sometimes be seen as a trap. If you don’t pay off the whole debt by the time the 0% APR offer ends, you’re left with a balance and the interest rate that applies after the promotion.

DepositPhotos.com, source of the image.

9. Consult a specialist

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Everybody is different, much like their debt position. You may assess your problem and get suggestions for solutions from a specialist. Perhaps a debt management plan or Settlement of Debt is more appropriate for you.

Settlement of Debt

. Unless your neighbor is a licensed debt management specialist, you shouldn’t depend on your neighbor for financial advice on your debt.

DepositPhotos.com, source of the image.

10. Take a loan from a total stranger

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I kid you not. In reality, it is peer-to-peer lending. Anyone with a job and decent credit may apply for this unsecured personal loan. You may combine your credit card debt into one loan with a reduced interest rate thanks to businesses like LendingClub. If you have many cards, it is also simpler to keep track of your debts.

MediaFeed.org syndicated this item after it first published on Debt.com.

Andrey Popov/Istockphoto provided the image.

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Source of the image: tumsasedgars/istock.

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