HOW TO GET RID OF YOUR CREDIT CARD DEBT – FASTER!

Many times during the course of having home buyers approved for mortgage financing I have discovered many don’t qualify because of too much credit card debt. Many young people have amassed huge debt just by having several credit cards all running a balance close to the limit. At this stage they are now finding it difficult to service these debts on a regular basis, or they are keeping their payments up to date and their credit rating is solid but they don’t qualify for mortgage financing because they already have too much debt load.

If you or someone you know has found them self in this situation here is a good strategy to get your financial house in order.

Credit Cards

If your debt is primarily on credit cards, cut and cancel your cards. If necessary, acquire—or keep—one low interest rate card that you will pay off monthly.

 Rollover Formula

Pay more on the card with the highest interest rate. Once paid off, add that payment amount to the payment you’ve been making on the second highest interest rate card.

Once the second card is paid off, add that amount to the payment on the third card, etc., until all card balances are paid off.

Example

Assume you have three credit cards—MasterCard, Visa and Discover. Combined, you owe a total of $5,350 and are making monthly minimum payments as outlined below.

Determine a percentage of your income—such as the 10% in this example—that you will add to your minimum payments to help pay off the debt.

 Additional payment of $340

On a net monthly income of $3,400, allocate 10% as an additional payment to pay off MasterCard—the highest interest rate card—while maintaining minimum payments on the other 2 cards:

Credit Cards

Balance

Interest Rate

Minimum Payment

Additional Payment

Total Payment

MasterCard

$1,850

@ 21.9%

$45

+ $340

= $385

Visa

$1,925

@ 15.9%

$55

Discover Card

$1,575

@ 11.9%

$40

Rollover $385

After 5 months, MasterCard will be paid off, Visa will be down to $1,772 and Discover, $1,448. Now rollover the $385 payment to the Visa payment of $55, totaling $440 per month and continue the minimum on the Discover Card:

Credit Cards

Balance

Interest Rate

Minimum Payment

Additional Payment

Total Payment

MasterCard

0

Visa

$1,772

@ 15.9%

$55

+ $385

= $440

Discover Card

$1,448

@ 11.9%

$40

Rollover $440

After 4 months, Visa Card will be paid off and the Discover Card balance will be down to $1,342. Rollover the $440 payment, adding it to the $40 Discover Card payment for a total of $480 per month:

Credit Cards

Balance

Interest Rate

Minimum Payment

Additional Payment

Total Payment

MasterCard

0

Visa

0

Discover Card

$1,342

@ 11.9%

$40

+ $440

= $480

Credit card debt is eliminated!

In 3 months, the Discover Card will be paid off leaving you credit card debt FREE!.

Credit Cards

Balance

Interest Rate

Minimum Payment

Additional Payment

Total Payment

MasterCard

0

Visa

0

Discover Card

0

= $480

After twelve months, your total credit card debt is eliminated and you now have $480 per month available for investment!

What’s important is that you now rollover this amount to investments and continue to use the compounding effect, but this time to increase wealth instead of debt!

If you follow this strategy faithfully and stick to just one credit card you will never be held hostage by these cards again. Here’s to being credit card DEBT FREE!!

  • ALL CREDIT CARD NAMES AND RATES USED ARE FOR DEMONSTRATION PURPOSES ONLY.

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