How to save money on debt-repayment

For many people the issue of debt repayment is an ever growing and pressing issue. Many people wonder if they can ever repay their debt and save money. Unfortunately this leads many people to make panicked and costly decisions in their debt repayment actions. Here is what you need to know about how to save money on debt repayment-

• Understand that there is no one size fits all solution for debt repayment. The key here is to make sure that whatever choice you make will not end up costing you more in either the short or the long-run. Ask yourself if the method you are choosing will have actually have the debt paid off when complete.

• Don't jeopardize your future. Financial experts unanimously agree that you should not ever borrow from your retirement account for any reason and certainly not to pay off your debt. One of the biggest reasons is that you can not contribute to it until you have repaid the loan thus losing the amount of money you would have gained over the same time period. Then your take home pay is less (because you have to pay back the loan) until the account is paid back. And you should keep in mind that if you leave your job, you will have to pay the entire loan immediately or you will end up with early withdrawal fees and income taxes. In addition you should understand that taking out money from your retirement account means that you could be liable for up to 20% taxes on the amount depending on your tax bracket. As an alternative consider asking family and friends if they would be willing to loan you money. While this can be fraught with difficult write up a contract, decide on a fair interest rate and make prompt and timely payments. This alternative can save you big money over borrowing form retirement accounts
• Don't jeopardize your house-This is a really bad idea if your debt was unsecured to begin with. Tying bad debt to your home's equity is not a smart move especially if you cannot pay your credit card debt, you could end up with a trashed credit rating. More importantly securing your debt with your home will mean that you could lose your home and get a trashed credit rating if you cannot make payments. The amount you could lose here can be catastrophic. Instead of tying your debt to your home consider refinancing your mortgage if current interest rates are at least one percent lower. This way you can free up cash that you could be using to pay down your debt. While there is still a cost to refinance this is a fairly low cost way to help with debt repayment.
• Don't be scammed by debt settlement-The reality is that most debt settlement companies tend to make the situation worse. In order for this to work, you have to stop paying your creditors. When the payments stop, then the phone calls will start and so do the negative credit report entries. Before long your credit card accounts will be charged off and your credit score will hit a new low. And worse yet after all this your creditors still may not agree to a settlement proposed by your company. And for all this the debt settlement company will charge you a fee that could either be set or a percentage of your debt. Instead of this consider working with a certified debt counselor. These programs receive licensing from the state and therefore are responsible to them as well. In addition a non-profit debt counselor will meet with you for free making this one of the best ways to handle debt repayment and save money at the same time.