You must be astonished to discover that even with the help of $10 on monthly basis; you can improve your funds. If you are making the payment of least amount required for credit card debt, then with the additional sum of $10 on monthly basis, you will be able to completely pay off your debt in relatively short time.

Saving by Paying More than the Minimum Amount

If you make payment more than the least amount required to pay for credit card, it will also support in saving cash. It is very simple, because you will repay little amount for the complete interest charges. Here is the mechanism of this phenomenon for your better understanding.

Paying off Debt by Making an Additional $10

For Bank of America credit card the least payment of credit card on monthly basis is one percent of your existing balance. If you add the interest payments and also delayed charges in a month, the figure will just go up. Now in an example, it will be exhibited how with an increase of your credit card payment by $10 on monthly basis will not only pay off your debt earlier, but also save money for you.

Let us just take an illustration where a credit card balance amount is $1,500 and the Annual Percentage Rate is 18 percent:

To make payment just with the minimum amount

The least payment on monthly basis is US$37. The total required time period to completely pay off the debt is 160 months or 13.33 years. The total interest payment during 160 months will be $1792.52

Pay $10 amount than least amount due of monthly basis

By adding additional $10 your monthly payment will become $47. This will reduce the total payback period to 44 months. The total interest payment during this time will be $555.76.

The prospective savings

Now, just with the addition of $10 more than the minimum monthly payment and continuing with it till the complete payment of debt amount, you will be able to save $1236.76 in terms of interest payment. You will completely knock off your debt just in 44 months.

Read the full story

1.    Monitor and Fix Your Spending Habits.

You start spending for a  thrill, soon it becomes a habit. Spending is by nature very addictive. You must realize that spending money carelessly is the one of the major reasons of debt related troubles. Half of the problem is solved if you can put a check on your spending and control your spending habit.

2.    Determine True and Total Cost of Your Debt Consolidation Loan.

Everyone, who is trying to sell you a debt consolidation loan, pitches low interest rate and low monthly payment as major benefits of a debt consolidation loan. Although having a lower interest rate provides you with an edge but It should not be the only factor to consider when you borrow money.

The decision to take a loan should involve a careful analysis of following parameters.

1. Amount of loan
2. Length of payback period
3. Processing Fees
4. Late payment fees
5. documentation charges
6. pre-payment penalty
7. interest rate

All of these factors help you determine true and total cost of debt consolidation loan.

3.     Debt Consolidation is not suitable for every situation.

Once size does not fit all when it comes to selecting tools for debt relief. There is no universal solution for debt management.  Debt consolidation, like all good things in life, is not right for every one having debt related trouble. You should do your own research. Talk to friends, family and co-workers about their experiences. Relying solely on advice of your debt consolidation consoler is very dangerous as they have their own vested interest involved.

4.     Each debt is different and some might not need consolidation.

Treat each of your debt differently. Evaluate it on its own merits. Read the terms and conditions for your debt carefully. Especially read the fine print. Calculate APR and total cost of loan using a loan amortization calculator. Sometimes your existing unsecured debt is cheaper than the debt consolidation loan being offered to you. In that case, you should avoid consolidating that loan.

Read the full story