pay off credit debt Archives | Ovation Credit Repair Services

Minimum Payments with Snowball

By | Credit Cards, Credit Repair, Debt, Your Credit

You have been making an honest effort to pay off your debts. Each month, with the money you have diligently set aside, you make a payment above the minimum balance to all of your accounts. Unfortunately, progress is slow. You are barely making a dent and the thought of continuing this pattern for several years to come is just painful. With no extra funds for higher payments, it is easy to feel like debt has swallowed you whole. Luckily, Ovation has the perfect tool.

Sometimes paying more than the minimum balance isn’t enough, particularly if the debt is substantial. Although initially it may sound like we are telling you to do the very thing we always advise against, desperate times call for desperate measures. Besides, the Minimum Payments with Snowball tool is no ordinary payment schedule. When using this strategy, only the minimum payments will be made for each debt. The funds that are leftover from what you budgeted for monthly payments can then be applied to the account with the highest interest rate.

This schedule uses the newly freed funds to pay down your other debts at a much quicker pace. As you continue to make payments, the amount of money available after making minimum payments will grow. By making these minimum payments, you are still meeting the required monthly demands, while allotting more money to a specific account. This will always result in paying off debts faster than with minimum payments alone.

The snowball effect that is implied is quite accurate. With each debt that is paid off, there are more funds available. For example, you may owe $500, $1,000 and $2,000 on three different cards. If you have $300 per month to spend on paying down debt and the minimum payments only total $200, rather than spreading that extra $100 to all three cards, focus all of it on the card with the highest interest rate. As soon as one account is fully paid off, you then have $150 extra to pay toward the other two.

For people with multiple accounts, those extra funds could add up quickly.

Minimum Payment with Snowball provides results you can see at a faster pace, ultimately reducing your debt. The biggest advantage of this plan is that it requires no additional funds to be set aside, which is great for those working with a tight budget. This plan, combined with frugal spending, can make you debt-free in no time. Financial freedom is accessible through several other Ovation Tools as well, allowing you to find the perfect individualized payment plan.

Avoid Becoming Mired in Credit Card Quicksand

By | Budgeting, Credit Cards, Payday loans

There are a number of incentives offered by credit card companies that entice the consumer to use a credit card for a variety of purchases on an ongoing basis. Combine this fact with uncontrolled spending habits, and you run the risk of suffering from poor credit card health. Certainly you can adopt spending habits that help you control when, why and how you use your credit card. At the same time, you can put into practice common-sense habits that will help you avoid out-of-control credit card debt to begin with.

First and foremost, read and understand the terms of your credit card, however monotonous and dry the reading may be. To the benefit of the consumer, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 compels credit card companies to use plain language in their contracts and statements. Take advantage of CARD, and know what you are agreeing to before you use your card.

Limit the number of credit cards you use, and avoid potentially costly balance transfers. The more cards you have and use regularly, the greater your risk of losing track of or control of your spending habits. Balance transfers used as a means to lower your interest rate and save money by shifting balances among many cards can actually cost you in terms of expensive fees and a poor credit rating. As well as balance transfers, cash advances also give the consumer a sense of spending power. However, you should avoid cash advances like a financial plague. For of all the “advantages” associated with using a credit card, cash advances can come with the highest fees.

You can avoid fees and heavy use of your credit card by establishing a personal emergency fund in advance. Before you are trapped in a vortex of credit card debt, set aside a percentage of your income that can be used in the event you immediately need money. By doing so, you can resist the temptation of applying for or using an existing credit card, subsequently paying a higher percentage to a credit card company.

Finally, while this tip may go without saying, do not lend your credit card to anyone. You are in charge of your credit card and ultimately responsible for the balance, regardless of who uses the card.


Effective Ways to Use Your Credit Card

By | Credit Cards, Credit Repair, Credit Scores, Debt

Your credit card can either be your best friend or your worst enemy. It simply depends on how you utilize this tool. For some, a credit card is limited to emergencies (New shoes or playoff tickets do not constitute an emergency). Others use their credit cards more frequently. Regardless of your preferred method of use, there are several ways to effectively use credit cards to build your credit score.

The first rule with credit cards is to use self control and take charge of your spending. Your credit card is not the equivalent of a get-out-of-jail-free card. Although cash is not leaving your hands, you are still spending money, and that is money you will have to eventually pay back with a lot of interest. Simply because you can purchase an item does not mean that you should. If it is not something you need or if you are tempted to use credit to buy something you cannot afford, it is best to be patient, and leave it on the shelf.

Stay in control of your credit card debt by not accepting every credit card offer you receive in the mail. If you are not an experienced credit card user, it might be best to practice proper spending with one credit card before you decide to start a collection. Too many credit cards will only further tempt you to purchase unnecessary items, and multiple payments will quickly become difficult to track, which could ultimately ruin your credit score.

One of the best things your credit card can do for you when used properly is build a good credit rating. Keeping the balance at less than half the available credit, paying your bills on time, and paying more than the minimum due each month is a recipe for an excellent rating. A good credit score allows opportunities for lower payments on other monthly bills, such as your auto insurance. The best way to use your cards is to make small purchases each month that you know you are capable of paying off when the bill comes.

Although building your credit rating can be one function of having a credit card, credit cards often come with other incentives. Many credit card companies offer rewards like cash back or points for every purchase. While these rewards may seem enticing, the cost of the interest added to the purchases you make is often more than the incentives are worth. Do not allow a reward lure you into purchases you do not need to make. Those benefits are only effective if you use your credit card wisely.

A credit card can be a useful tool, allowing you to build your credit rating so that you can obtain lower interest rates on car and home loans. To be an effective tool, however, you must be in control of the credit card and not let the credit card control you.

Favorite Ovation Tool: Lowest Balance Paid First

By | Ask a Credit Expert, Credit Cards, Personal Finance

So you want to pay off your debt and want to know the best way to go about it. Our Tools page lists seven ways: Minimum Payments Only, Minimum Payments With Snowball, Lowest Balance Paid First, Highest Balance Paid First, Highest Interest Paid First, Split Discretionary Evenly, and Bimonthly Payments.

Which is best? As in most things, it depends on your situation and your budget. You have to ask yourself what’s more important: the morale boost of a quick payoff, reduced interest payments, the satisfaction of paying off a large balance, or the stability of a well-defined payoff schedule?

Lowest Balance Paid First is the best choice for a number of reasons.  First, if you’ve run up a large debt across several accounts, you’re likely to be over-extended. And that means that your discretionary cash (money you have remaining after making minimum payments on your debt, paying your monthly bills such as rent or mortgage, utilities, and insurance, and paying for food, incidentals, and entertainment) is likely to be somewhat limited.

However much it is, applying your payment to the lowest balance first has a multiplying effect because it’s a significant percentage of the total owed. That added amount, when combined with the minimum amount, will drive the debt’s balance to zero relatively quickly. Just be careful that you don’t add to that debt or add to your debt in a different account. Sticking to the plan and actually paying off that first card will give you a huge morale boost, as will adding the now freed up money to the next lowest balance.

Suppose your lowest balance debt is $2,000, the interest rate is 14% and the minimum monthly payment is $75. According to the payment schedule on the Tools page, your last payment will be January 2015, and you’ll pay $410 in interest. Now suppose you can pay an additional $50 a month. Your last payment will be October 2013, and you’ll have paid $227 in interest, a reduction of $183. You now have $125 to add to your monthly payment on the lowest balance of your remaining debt, and you haven’t needed to make any additional changes to your budget.  As a bonus, you begin paying that down 15 months sooner.

Lowest Balance Paid First is a great tool for managing your credit debt. Your choice may be different depending on your situation. Whichever tool you choose, keep in mind that your primary focus should always be to eliminate your debt.

Get Creative About Finding Money in the Budget to Pay More to Credit Debt

By | Budgeting, Credit Cards, Personal Finance, Revolving Debt, Save Money

If you didn’t know any better, you might suspect that credit cards were the insidious invention of a Las Vegas casino conglomerate. Certainly, the odds of “winning” in the game of credit spending are in favor of the “house.”  Getting ahead of credit card debt demands that you get ahead of interest payments in your effort to pay down the principal amount – the amount you actually charged.  While it may seem that every dime in your spending budget is accounted for, preventing you from making larger credit card payments, you can find ways to cut back personal spending. You can indeed spend less day-to-day, ultimately saving you more money in the long run by paying down your monthly credit card debt sooner rather than later.

One of the best ways to curtail your discretionary spending is to examine how often you eat outside the home. Your job may demand a daily quick trip through the doughnut shop or coffee shop drive-through, you may make enough money to afford lunch out each day with your co-workers, and your family schedule may be hectic enough to make pizza delivery or fast food a blessing. These combined expenses, however, dramatically impact your household budget. Some research suggests that half of our food budget is allocated to eating outside the home. You can save money by avoiding the daily latte, the lunch with co-workers, and the fast food hamburgers. Pack lunches and plan meals ahead of time to better manage your time, expenses, and your diet.

As you examine your dining habits, also take a look at your entertainment expenses. Do you need 200 or more stations, or are you paying $50 per month for the privilege of watching your two favorite channels? Consider online websites that often offer free streaming movies and television programming. Alternatively, you can pay a monthly fee that is a fraction of what you might pay your local cable or satellite provider for streaming services like Hulu and Netflix. As well, the expense of renting a movie and making popcorn at home is far less costly than taking the family to a movie theater. Your family evening is also more intimate when sharing a movie at home, and you can avoid twenty minutes of advertising and movie previews.

Other methods of reducing spending include walking or riding a bike instead of driving your vehicle, monitoring your utility use (electricity, water, and heating are often wasted, yet controllable expenses), and cutting back on impulse buying that is often triggered by sales found in department stores (get what you went to the store for, and get out!).  All of these items by themselves might seem trivial, as may the relative cost of a cup of coffee, one food item, or a quick drive to the store. These items calculated collectively, however, represent a significant portion of your budget that would best serve you by being assigned to your monthly credit card payment.

4 Great Tips for Tackling Christmas Debt

By | Budgeting, Credit Cards, Debt, Featured, Payment, Personal Finance, Your Credit

When it comes to Christmas, people often throw their budgets out the window. Credit card companies sing carols in the halls as the debt piles up and their bonuses get bigger. People just assume they can take care of it next month or decide they’ll figure it out after the holidays because Uncle Fred really needs that food dehydrator.

Once the presents are unwrapped and reality sets in, you realize that your credit cards are bulging with debt and you need to make some decisions on how to get it paid off before next Christmas.

Pay Off as Much as Possible Right Away

Odds are most of the Christmas shopping was done recently, so the interest hasn’t been applied to it yet. Try and take care of as much of the debt as possible before that interest hits. It doesn’t matter if you make a payment every week or so, as long as you are paying down that debt. You should start with the highest interest rate cards first and work your way down. Do not pay only the minimums as this can take literally years to pay off the debt.

Make a Plan

Call each of your credit card companies and find out exactly who much you owe on each card, what their monthly interest rates are and when payments are due. If you have any credit cards that may go over the limit because of interest, then take care of them first. Make a plan to pay down and eliminate the debt each month. The last thing anyone wants is additional over the limit fees. Also, make sure you pay your bills on time and save yourself late fees.

Consolidate the Credit Debt

If you have a home equity line of credit or can get a home equity loan, then you can completely pay off the credit card companies, and instead, make a single loan payment. The interest rate on the loan is likely to be much less than the credit cards and you don’t have to worry about juggling several different payments. If you do chose this option, then try to stay away from using the credit cards until the loan is paid off. You don’t want a large monthly loan payment and credit card payments as well.

Work With A Credit Counselor or Repair Expert

If the debt is overwhelming and you don’t feel like you can take on the debt yourself, then you can work with a credit counseling or credit repair service. Credit repair services like Ovation specialize in helping people with large debts make the right decisions and will even work with credit card companies to help save on interest rates and monthly payments.

Christmas is a time of great joy and celebration, but for many it’s also a time for large debt. Don’t get stuck in the quagmire; follow these tips for getting your life back on track after the holiday season.

Choose a Payment Schedule to Fit Your Needs

By | Credit Cards, Credit Repair, Credit Scores, Debt, MasterCard, Payment, Revolving Debt, Visa, Your Credit

The holidays are over, and if you’re like a lot of folks, your credit cards got quite a workout. As 2012 rolls in, you’re probably wondering how can you best handle the extra charges that’ll show up on your next statement. Ovation’s Payment Scheduling Tool can help you find a solution that fits your needs and goals. Ovation’s payment scheduling tool is available to everyone; Ovation customers have the added option of being able to save and download their queries. Anyone can run scenarios to determine the best course of action:

Pay highest interest first: If your goal is to avoid interest payments, this is the right scenario for you. Let’s say you have a couple of cards that charge 20 percent interest and you have a couple of cards charging 10 percent interest that have higher balances. You’re better off paying your higher interest cards first because you’ll pay a lot less money in interest and then you can focus on paying down the balances on the other cards.

Minimum payments only: The scheduler will tell you how long it will take you to pay the cards off.

Minimum payments with a snowball: This option tells you how long it’ll take to pay off the cards if you add an additional amount to the minimum payment each month.

Highest balance first: Another option is to pay off the card with the highest balance first to get rid of the bigger debt. You’ll have to apply more of your income to it, but once it’s paid off you can split that amount over several accounts. That way you can get four or five accounts paid off after you pay off one big one.

Lowest balance first: This option will give you the satisfaction of actually paying a credit card off and free up some cash to apply to another card’s balance.

Split Discretionary Evenly: This might be the option for you if your goal is to increase your credit score and the only thing holding it down is a card or two with a balance that’s more than 50% of the card’s limit.  Focus on those cards, get them below 50% debt to limit ratio, and then switch your focus to your high interest or high balance cards.

Bi-monthly payments: Choose this option and the amount of your bi-monthly payment, and the Payment Scheduler will tell you the most effective way to split your payment amount to get everything paid off.

We invite you to try Ovation’s Payment Scheduling Tool. It’s easy to use, helps you find the best way to manage your credit card balances, and puts you in control of your financial future.

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