by KYW's Salil Gutt
New data reveals that U.S households are cutting debt. That is good news as high levels of debt result in high levels of anxiety in any economic downturn. Here's how you get onto this debt reduction bandwagon.
First off. Know what the amounts of debt are in the various categories, the interest rate and the monthly payments. Make sure that the monthly payments for credit cards are well above the minimum that card companies ask for. Now add up the total monthly payments and bump them up on your new budget. An extra 10% would be fantastic.
Now get smart about interest rates. Home equity lines of credit now cost less than 4% and are tax deductible. Loans on credit cards and cars are not tax deductible so it makes sense to use money from home equity lines of credit to pay off these higher interest loans.
Finally. Pay the same amount on the mortgage but assign the much higher payments to the home equity line. These are variable rates and you have at most a three year window period before interest rates start to rise again.
Remember there is no downside in paying off debt.
E-Mail Story
Print Story
