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What to Do When You've Maxed Out Your Credit Cards

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If you have been relying on your credit cards to pay your monthly bills, there will come a point when you max out all of your available credit. This can be a serious problem, since you will have monthly debt payments on top of your regular expenses. If you are close to maxing out your credit cards you need to address the problem as quickly as you can. This is serious problem and if one thing goes wrong you may find yourself unable to cover your basic expenses. This may also be a sign of more serious spending issues.

1. Set Up a Bare Necessities Budget

When you find yourself in this situation you will need to prioritize your spending before the month begins. You will also need to cut out any unnecessary spending until you have cleared up a good portion of your debt. The most important things you need to continue to cover is your rent or mortgage payment, your utilities, your food expenses (but stop eating out) and your transportation costs. You may need to cut out your entertainment expenses and clothing allowance for a short period of time.

2. Prioritize What You Will Pay

It can be difficult to not pay a credit card, but if you have to choose between putting food on your table and paying a credit card bill, you should choose food. If you are at a point where you do not think you will be able to pay some of your bills you should cut back on all of your nonessential spending. You do not need to pay for television when you cannot afford to make other payments. Similarly, you can cancel gym memberships, and stop going out to eat. Your groceries should be the basics and should not include extravagant items. You can also cut back on alcohol and cigarette expenses if you are in this situation.

3. Find Extra Money

Find ways to supplement your income. If you are in this situation, you may not make enough money to survive on each month, and you will need to look for a long-term solution to the problem. This may mean that you need to go back to school, or look for a job that utilizes all of your skills. You may need to find a second job to help you clean up your debt. If your budget would work without all the extra debt payments, then a second job is a good fix to the problem, and you can quit once you are out of debt.  You can also hold a yard sale or sell items online to raise money to pay off your debts.

4. Create a Plan

You should create a solid debt payment plan that allows you to focus your money so you can pay off your debts more quickly. First, you will need to catch up on all of your payments, and then you should apply any extra money you have to one debt at a time to clean it up more quickly. Some people work from smallest debt to larges, other people work from highest interest rate to lowest. You can determine which one will help you the most. When you finish paying off a debt you transfer all the money you were paying to next debt on your list.

5. Contact Your Creditors

You can call your creditors and ask for a lower interest rate. If you cannot make a payment one month you can contact them to see if they are willing to negotiate different payment terms. When you make these types of arrangements you often close the accounts and you will no longer be able to use the credit cards, even though you still need to make monthly payments until they are paid off. If you have a student loan you can put it on deferment for up to a year to allow you to try to get your other debt under control. If you qualify you may want to transfer your credit card balances to credit cards with lower interest rates, but you must stop using your other credit cards first if you want this to work in your favor. Don't close your credit cards until you have paid them off.

6. Credit Counseling and Debt Settlement

Credit counseling and debt settlement are options if you are having a difficult time making your payments. A credit counseling service will help you set up a budget, and take one monthly payment from you to give to your creditors. They will negotiate lowers interest rates and payment terms with your creditors. Debt settlement will help you save money to settle debts you have not paid on in several months or years. You should carefully choose the company you use since many do not do everything they promise or close suddenly and take your money with them. You can also do both of these things on your own. If you are in this situation, you should create a plan so you no longer need to borrow, because it is hard to find a loan with poor credit.

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