Loans By Trista - Debt Analysis & Reduction

Debt Analysis & Debt Reduction

	Debt Checklist Do you have too much debt?
	Debt Analysis Chart Analyze your debt factors
	Debt Reduction Tips Practical ways to reduce debt

Statistics support the facts that many Americans are utilizing credit to maintain themselves now, but doing so can keep them from moving forward in their standard of living. Here's a brief checklist and analysis chart to help you determine if you're seeing too much debt that may be holding you back

Debt Checklist

	Are you able to save 10% of your gross income?
	Do you have 7 or more credit cards?
	Do you make only the minimum monthly payment on all your credit cards?
	Do you borrow from "Peter" to pay "Paul"?
	Have you had to ask someone to cosign for a loan because of your credit rating?
	Do you know how much money you actually owe?
	Do you use your credit cards to borrow money to pay for other debts?
	Are you depressed about your level of indebtedness?

If two or more of these apply to you, you are definitely seeing too much debt in your life. But, a plan with timelines can change all that!

Debt Analysis Chart

To find out where you are in your finances, make a list of absolutely everything you owe per month on all credit accounts only. (Do not include your mortgage, utilities, food, etc.)

It should look something like this:

Date Prepared: __________________
Account Name:	Payment:	Amount Owed:	Interest:
Visa	$135	$4,300	17.9%
MasterCard	$90	$3,200	19.0%
Etc.	Etc.	Etc.	Etc.
TOTAL:	$225	$7,500
Total Net (Take-home) Pay Each Month: $__________________

A simple subtraction of what your total monthly payments are from your total net income will show you how deeply in debt you are. To determine your debt-to-income ratio, divide your total monthly payments by your monthly net income. This is the percentage of your take-home pay that goes to your non-mortgage debt.

Most of us are aware of the dangers of being too reliant on our credit cards as a source of money. In terms of credit card debt, one of the realities we're faced with is paying a very high price for most of the money we owe.

If you're paying only the minimum on any credit line you have, most of your payment is going for interest with your principal decreasing v-e-r-y slowly. Here are some suggestions regarding credit cards:

Cut them up and throw them away. Keep just one for emergencies only.
Look for credit cards with lower interest rates. Utilize them to pay off higher interest cards. (Be careful, because a number of credit card companies will "seduce" you by offering a low interest rate for a period of time, but after that time, the interest rate will go high again).
Look for credit cards with permanent lower interest rates. They are not easy to come by. Look in Money Magazine each month for a listing.
Focus on paying off the higher interest debt first. It really will save you money in the long run.
Pay more than the monthly minimum due if at all possible. Remember, doing this is the only way to significantly reduce the principal.
Investigate refinancing. If you are a homeowner, you may be able to refinance your home at a lower interest rate than you currently have. Since you would be refinancing a higher loan amount (assuming your home has appreciated and depending on how long you've lived there and how much you've improved the property), you could end up with a "chunk" of money to pay off credit card debt.
Note: Also, depending on your age and financial situation, you might want to refinance your home for 15 years, rather than 30. Your interest rate will be even lower.
Consider consolidation. Combine several high interest rate loans into one with a lower rate.
Negotiate with lenders. Most lenders would rather keep you as a customer than have you file bankruptcy or simply renege on what you owe them. Be direct in stating your financial situation and your desire to find a solution. A lender may reduce your rate or lower your monthly payment to keep you.

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Debt Reduction Tips