How to Get Out of Debt and Lower Your Monthly Payments Theresa Williams-Barrett*, Vice President of Consumer Lending and Loan Administration The vast majority1 of Americans have some type of debt – and this is true across generational lines. Furthermore, while millennials are the most likely to be in debt, they seem to be abusing their credit cards the least. Mortgage and student loan debt (increasingly the latter) comprise most of that total, but as those obligations mount and the cost of living rises, consumers also face rising credit card, auto and medical debt as well. Unfortunately, many people resort to piling up more debt in their efforts to pay off what they will have and remain financially afloat. This may lead to a reduction of your FICO Score® which can affect your ability to get new credit or low interest rates (towards a car, mortgage, etc.) and you begin to feel helpless and overwhelmed. There is help. There are always options for acquiring new loans and lines of credit – much of our economy and lifestyles depend on these things. But you should also know how to get out of debt once monthly payments on loans, mortgages and credit cards begin to take a toll on your ability to afford the essentials. Here are some tips for digging out of a debt hole: How to Get Out of Debt Tip #1: Get a Consolidation LoanWhy consolidate your debt with a debt consolidation loan? If you’re haunted by mounting unsecured debt from credit cards and/or personal loans, as well as high interest rates, it’s time to consider combining them into a debt consolidation loan. Debt consolidation loans enable you to make one fixed payment, at one fixed rate, within a specified term to pay off all your unsecured debt. These loans typically have lower rates than most credit cards, and best of all, many offer rates that are fixed for the term of the loan. This feature makes them unlike credit card rates, which are variable. Consolidating payments can make debt easier to manage. See what your payments would be with Affinity’s Debt Consolidation Calculator. When considering a debt consolidation loan know that you may be required to close some accounts. If some accounts do remain open it is important to avoid using your credit cards to the same extent – otherwise you will repeat the cycle and have not only a debt consolidation payment but also have revolving debt payments. Tip #2: Be Smart About Credit CardsCredit cards are key players in the game of debt. The credit card market is very competitive. Consumers constantly receive new credit card offers, each touting enticing incentives to open a new line of credit with very low introductory rates or extra reward points for high ticket purchases. These offers can be too good to be true, with high balance transfer fees or requirements to make a large amount of purchases in a short time. Such catches are all in the fine print that most consumers don’t necessarily read. It’s essential to read the fine print – the tiny print at the bottom of the credit card offer or mailer. This often points out vital information about your card’s interest rate and the duration of time that it may increase. We’ve seen interest rates spike as high as 30% after six months. There also may be stiff rate increases if payments are late, even once. Remember, even 0% rates do not always equate to saving money. Debt can also happen when a low rate introductory card is opened and a credit limit increase is requested. When in doubt about credit cards, ask Affinity! Affinity offers credit card options tailored to your needs and without slick gimmicks. As light as the credit card is in your wallet, keep in mind that the consequences of high credit card balances and higher rates will be much heavier. Some financial institutions, such as Affinity, offer free financial education tools as well as free and confidential credit counseling services. These free services provide Affinity members with the tools and personal services needed to understand their spending habits and the life changing benefits of creating a budget. What happens once you’re debt free? Let’s face it, in today’s world getting to that point isn’t easy. But we want to help you to manage your debt and learn to budget wisely. If you have taken the journey to consolidate your debt and successfully paid off your high balance and high interest rate debts, it’s important to use credit cards responsibly. If you start to run up large balances again, history may repeat itself. If you work to manage your debt, you may start to see your credit score increase as well as your capacity to borrow for what you truly need. If you MUST make purchases and cash is not available, make it your mission to repay that debt as quickly as possible. We recommend that you try to pay the most money to the higher rate card. It’s also important to commit to paying your monthly payments on time and pay as much as possible when you can – not just the minimum payment required. Getting out of debt starts with smart savings. Join our Great Savings Challenge and get started today! 1 The Motley Fool * NMLS #1389903 This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.