Debt management: 3 ways to clear your credit card debt
In modern-day society, a credit card is becoming a somewhat essential addition to our wallets. Allowing us to ‘buy now and pay later’, our plastic companions can provide us with access to credit when and where we need it – which can be great, because it can help us cover those emergency costs like car repairs and medical bills.
However, it is far too easy to get carried away with spending, and many of us fail to keep track of how much we have actually spent on our cards – which leads us into debt problems.
Of course, the solution to your debts depends on how much debt you are actually carrying, but here are a few general pointers that should help you to clear your credit card debts.
Check your budget
Are you paying as much as you possibly can do towards your credit card debts each month? For many of us, the answer to this question will be… ‘I’m not sure’. Well here’s how to find out.
You should write down everything you earn each month (income), followed by everything you need to spend each month (expenditure). Now subtract your expenditure from your income, and you will be left with your disposable income.
Your disposable income is the money you have available each month to pay towards your unsecured debts (your credit cards, for example), as well as for saving, and for spending on non-essential goods and services. Now you know this amount, take a look at how much you are required to pay towards your unsecured debts each month, and subtract this from your disposable income.
If you are left with spare money, you could use this to ‘overpay’ your unsecured debts – to pay more than you’re actually required to – meaning you will become debt free sooner.
Seek professional debt advice
If you are struggling to address your debts on your own, you could seek professional debt advice.
The right debt adviser will be able to assess your situation and let you know what they think is the most suitable way for you to clear your debts. They may simply offer you a few tips on how to improve your debt management skills, or they may recommend that you…
Consider entering a debt solution
You may find that a debt solution can help you tackle your debts. For example, if your debts are affordable, but you would simply like to make them easier to manage, a debt consolidation loan may be appropriate for you. Debt consolidation involves taking out a new loan and using it to repay all your existing unsecured debts in one go – leaving you with just one payment to make each month instead of several.
However, if your credit card debts prove to be the ’straw that breaks the camel’s back’, you may need a more formal debt solution – such as an IVA (Individual Voluntary Arrangement). An IVA is a legally binding debt solution between you and your unsecured creditors in which you will be required to pay a set amount of money every month for – in most cases – five years. Although an IVA will stay on your credit report for six years (affecting the cost and/or availability of credit during that time), once it has come to a successful conclusion, any remaining debt will be written off.