Debt Free Living

Plan To Eliminate Debt By Taking Advantage Of These Easy To Apply
 But Little Known Debt Reduction Techniques

 by: Brandon Wilkins

Once you get your credit report, go through it thoroughly and dispute anything that appears to be incorrect no matter how small the error may seem. Even the tiniest of errors could have a significant impact on your credit score and your debt reduction plan.

Since you can get one report from each bureau, I recommend that you get 1 every 4 months instead of getting all 3 at once. This way, you can check your credit 3 times per year instead of just once.

Challenge property assessments. If you are in an area that has been hit hard by the downturn in the real estate market, then you might want to consider having your home reassessed by your authorized property assessment division. In most cases property values have gone down, but your property taxes have not. Maybe they've even gone up. But if you challenge the assessed value, they have to reassess the property and if it comes in lower than what's on record; they must adjust (lower) your property taxes accordingly.

If you have a mortgage where you pay escrow for the taxes, this is a good strategy because your monthly payment should go down with the new tax amount. The key here is to keep paying the same amount for your monthly note, but to now designate that extra money to go on the principal only. This will allow you to pay the property off a lot sooner.

There is a drawback to this strategy though. Because of the lower assessment, it could reduce the property's value and your overall net worth. However, we know that this real estate market will correct itself and turn upward at some future point. So, if you plan on holding the property for at least another 5-10 years, this is a sound strategy. If not, then think twice before challenging the assessment.

Intermediate Techniques

Ask to restructure loans. In a tough economy, even many lenders/banks are feeling the pinch; that could mean good news for you. Give your lenders (car, house, credit card) a call and ask about restructuring your loan. You might get a lower interest rate, lower payment, better terms or a combination of the three.

If you have a good payment history, you can use that as leverage to do some negotiating. If you have a poor payment history, they’ll be likely listen to your options for fear of getting no payments if they don’t negotiate. Either way, you are sort of in the driver’s seat. And you never know what you’ll get until you ask!

Curb impulse spending. Use a metal coffee can to curb impulse credit card spending. You may have heard people mention that freezing their credit card in a block of ice helps them from using the card to buy stuff on impulse. This is a very good idea, but for those who lack real discipline and patience, they sometimes stick the block of ice in the microwave and melt it to get to the card. By freezing it in a metal can, you cannot put it in the microwave. You have to wait several hours for it to thaw out (even if you try melting it in the stove) and as a result it gives you time to think about whether the purchase (and the additional debt) is worth it.

Long-Term Techniques

Don’t buy payments. One of the best ways to reduce debt is to never buy or negotiate large ticket items based on the payments as many salespeople will try to get you to do. Always buy on price alone.

How many times have you heard, "you can have this great (insert item here) for only $299/month!"? Because it's easy to make an emotional decision of "I can afford that". But once you've started buying and look at the overall price you'll be paying and the debt that you've got yourself into, you'll regret it.

I got trapped into this personally about 12 years ago. I wanted a BMW so badly that I didn't look at the price. I just told the salesperson I wanted a payment of less than $450. Did he say, "I'm sorry I can't make that happen"? No, his response was "Sure!" Well, when all was said and done, you know how long that car was financed for? 48 months? 60 months? Try 78 months!!!

Be orderly about paying off debt. Once you decide to take charge and get on a high powered debt reduction plan, you might wonder: is it better to pay the smallest debts off first or the highest interest ones first?

Smallest debts first - the benefit of paying smallest debts off first is that you actually get to see progress quicker. When you can see the list of people that you owe start to shrink, it makes you feel good and you know that you're plan is working.

Highest interest first - the benefit of paying the highest interest debts off first is that you save more money over the long term than if you were to let the higher interest rate linger on.

A good rule of thumb to use: If you have more than 4 debt accounts, use the smallest debt first method; otherwise pay the highest interest rate debts off first.

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