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If you could erase your credit card debt by giving up Facebook for a year, would you do it? Most Americans said in a survey they would give up social media – among other things – to get rid of their debt.
Credit card debt has continued toclimb over $1 trillion, with the average cardholder having a balance of $6,375, according to a report by Experian. One in three Americans is losing sleep over their debt, and one quarter report that debt has hurt their relationships with family, according to a survey by Mr. Cooper, a non-bank mortgage servicer and lender.
The survey was conducted online in April 2018, and questioned 1,054 adults with more than $500 in credit card debt.
Those with debt said they would do extreme things to erase it, even before seeking out financial advice, the survey found. Even though 68 percent of those with credit card debt are concerned about how they will pay it off, very few have plans in place to get rid of it.
More than two-thirds said that it would take them more than six months to pay off existing card debt, and 8 percent said they would never be able to pay their debts off.
Nearly 20 percent were not aware of the interest rate on their credit card, and 77 percent carry a balance from month to month instead of paying their bill in full.
Consumers often don’t fully understand how to use credit cards in their overall financial plan, said Josh Harris, a faculty member at Clemson University and financial planner at Signature Wealth.
“We see clients when they need help getting out of a financial hole,” said Harris. “Or when they see one coming on the horizon.”
Very rarely do people ask for help proactively to avoid debt, Harris said. When they do start feeling the pain and stress of their financial situation, that’s when they seek advice.
Find a way out of debtThere are ways to pay off your card debt that don't include giving up something you love.
1. Look for money in your home
If you own a home, you might consider tapping your equity, which likely comes with a lower interest rate than your credit card. Thanks to the new tax law, however, the interest you pay on that loan typically isn't deductible unless it's used toward qualified home improvement expenses, according to the Internal Revenue Service.
“Millions of American homeowners are sitting on a hidden source of wealth – their home,” said Kevin Dahlstrom, chief marketing officer at Mr. Cooper. “As consumer debt continues to reach all-time highs, tappable home equity is also at its highest level on record.”
2. Follow a strategic payment plan
Two popular methods for paying off debt are the “debt avalanche” or “debt snowball.” The avalanche prioritizes paying off the highest interest loan first, while the snowball says to pay off the smallest debt first. Find a plan that works for you and stick to it.
3. Negotiate your rate
In some cases, you can negotiate for a lower interest rate. In addition, you can also consider consolidating your debt either with a personal loan or a low-rate transfer.
4. Pick up a side hustle
Having a second job could bring in enough extra cash to make a huge dent in monthly bills. The average person with a side hustle made $686 per month, according to a recent study by Bankrate.com.
5. Actively stick to a budget
Over half of the respondents of the Mr.Cooper survey said that even though they had debt, they did not have a budget. To eliminate debt, it’s important to have a basic financial plan in place, and the first step is looking at your expenses to determine where you could cut back.
“Focus on what behaviors brought you to this situation and what steps you can take to eliminate the stress and debt going forward,” said Harris.
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