Towards Totally Eliminating Your Credit Card Debt
There are millions of Americans out there who have paid off heavy credit card debt, and you may be one of them. To get rid of credit card debt, it won’t be enough, however, to just make minimum monthly payments. In fact, you just need to do a little more than just paying the minimum monthly payments; you can save thousand of interests and shorten many years in settling your credit card debt. To give you a better picture how it work, let use a case study to elaborate the solution.
A friend of mine asked me to take a look at her monthly credit card statement; according to her, she has stopped using this credit card and try to pay it off, but feels like she isn’t getting anywhere.
The credit card statement record shows her balance is $5218.00 and she is paying 18% of interest; and she is paying the minimum payment at 3.5% or $10 whichever is higher. Like many who confuse with financial matters, she thinks that as long as she stops using the card and by just paying the minimum of monthly balance, her credit card Debt will be cleared soon.
The Calculation Result:
If she has stopped using this credit card, and if she continues to make the minimum required monthly payment, as she has been, based on the way her bank calculates her minimum required monthly payment.
It will take her 181 months to pay off her current credit card balance of $5,218.00 and she will pay a total of $3762.35 in interest.
In other words, if she continues doing what she has been doing. It will take her 15 years and cost her $8980.35 to pay off her $5218.00 credit card balance. No wonder she feels like she is not getting anywhere.
So, what should she do?
Actually, it quit simple, if she able to pay the minimum payment of $5,218.00, which is $181.37, which means this is her affordable amount. Instead of paying the minimum payment as defined by the credit card company, she continues to pay $181.37 from now on.
As the result, she will pay off this credit card in 43 months instead of 181 months and she will pay $1635.45 in interest instead of $3762.35 in interest, saving $2126.90 in interest charges. See the different?
What she can more?
If she really wants to go for it, she could increase the amount of her new self-imposed minimum required monthly payment. For example, if she were to start paying an additional $18.63 a month for a total of $200.00 a month.
She will pay off this credit card in 34 months instead of 181 months and she will pay $1428.30 in interest instead of $3762.35 in interest, saving $2334.05 in interest charges.
If she were to start paying an additional $68.63 a month for a total of $250.00 a month, she will pay off this credit card in 26 months instead of 181 months and she will pay $1071.09 in interest instead of $3762.35 in interest, saving $2691.26 in interest charges.
If she really wants to eliminate her credit card debt as soon as possible and her financial is able to support it, she could double the amount of her new self-imposed minimum required monthly payment. If she were to start paying $362.74 a month instead of $181.37 a month, she could pay off her credit card balance in 17 months.
There are a number of things she could do, but this is one of the simplest and it’s something she can start doing right now to begin eliminating her credit card debt or debt consolidation. You can do the same to start eliminate your credit card debt.
Types of Federal Direct Consolidation Loans
Education is getting costlier day by day and it is a common phenomenon to see graduates leaving a university with a load of debt along with their degrees.
Most will need a consolidation direct federal loan student since managing a number of student loans is quite tough on a fresher’s salary.
Most of these loans repayment plans are designed keeping in mind your potential salary which you might get after four to five years of passing out.
In case you are finding it difficult to pay back and manage your numerous loans, then applying for a student loan consolidation is a good option.
Student consolidation loans can be broadly divided into two - Direct Loan Consolidations and FFEL Consolidation Loans.
While Direct Federal Student Loan Consolidations are offered by US Department of Education, FFEL consolidation loans are offered by lending agencies and banks etc.
There are three types of Federal Direct Consolidation Loans for Students:
Direct Subsidized Consolidation Loans
Direct Unsubsidized Consolidation Loans
Direct PLUS Consolidation Loans.
If your student loans fall within any or all of these categories, then you can avail of one single consolidation loan.
Federal consolidations can help you get your finances in order by simplifying your loan repayment options to a large extent.
This is because any federal loan consolidation scheme lets you club all your student loans together. So you are left with just one single installment to be paid per month and this too comes with a non flexible interest rate.
The interest rate of your consolidation loan is determined as the average of the interest rates of all your outstanding loans that you are getting consolidated.
It is a fixed rate of interest and can go only up to a maximum of 8.25% only. You can get your student loans consolidated even if you have already defaulted on some of your loan payments, provided you are able to meet certain eligibility criteria.
In case you want to avail of a consolidation direct federal loan student, then you can contact the Direct Loan Origination Center’s Consolidation Department in order to find out more about it.
If you want to avail an FFEL loan, then the agency granting you the loan should be able to furnish you with detailed information about availing the loan.