The fact that you want to pay off credit card debt means you are responsible and desire a better financial future for yourself. Unfortunately, some people make common mistakes when paying off their debt that do more harm than good. We discuss which tactics to avoid and what to do instead to make headway in getting rid of credit card debt in this blog.
Taking Out a Home Equity Loan for More than You Can Afford
If you own a home, tapping into your home equity to consolidate your debt and have one monthly payment can make sense. The interest rate on a home equity loan is typically much lower than a credit card, and you may even have cash left over to finance a large purchase at the lower rate.
The danger with home equity loans is that people sometimes take a bigger loan than they need and then cannot afford the payments. Not only do you put your credit score at risk when this happens, but you risk losing your home as well.
Another common issue with home equity loans is that people do not change their spending habits after receiving one. They end up in worse financial shape because now they have to repay the loan plus the new credit card debt. The bottom line is to only borrow what you need to consolidate debt at a monthly payment and interest rate you can afford.
Not Focusing on Other Financial Priorities
When you direct every extra penny you have to pay off credit card debt, you miss the opportunity to build an emergency fund and contribute to your retirement. These things are also important. If you have nothing to fall back on during an emergency, you will find yourself back in credit card debt again if an expense arises you did not have in your budget like car repairs. A financial counselor can help you balance competing financial priorities for the best results.
Forgetting About Earning Money Instead of Just Saving It
Reducing your expenses is the first step towards having the ability to pay off credit card debt. However, you also want to focus on bringing in more money to reach your goal faster. Jobble can help you find short-term gigs to bring in the funds you need without committing yourself to another job. Preparing a budget and living by it is also a good idea.
Paying off credit card brings a great feeling of accomplishment. Your life will be even more enjoyable and stress-free if you make a point not to get into credit card debt again if you can help it.
About the Author: Lisa Kroulik has worked as a freelance content marketing writer for 10 years. She loves the work and the lifestyle it affords. Learn more about Lisa’s work and availability through Writer Access.