You are consistently making all your monthly debt repayments but it looks like your balance is not getting reduced substantially. It seems that you are not progressing at all in the right direction toward your debt-free goal. You must understand how exactly these credit card repayments are applied and only then you would understand the reason why you feel that the balance is simply not dipping. You need to understand the reasons why your debts are not getting reduced to the extent you are thinking they should.
E-commerce businesses are showing a lot of promise and they have made some progress but you simply cannot overlook the fact that Americans across all sectors are struggling under heavy debts. All businesses and households are tackling serious debt issues. According to the U.S. Federal Reserve data, households in the U.S.A. are having on an average $16,048 in terms of credit card debts and definitely, over $37,000 in 2017 in terms of student loans.
According to the statistics presented to us by the ‘Consumer Financial Protection Bureau’, around 52% of all the existing credit bureau filings are attributed to medical debt. The average loan towards the purchase of any new vehicle seems to be more than $30,000 extending over a period of 69 months. Thanks to Forbes, we now know that Americans on an average actually owe $196,014 on mortgages.
Moreover, US corporations are facing debts of $6 trillion as in 2018. “A huge $6.3 trillion in corporate debt should trouble Wall Street investors facing a stricter rate environment even as cash hoarding reaches a peak, according to S&P Global.” as discussed on cnbc.com. In this backdrop, it is quite evident that e-commerce business owners are also, dealing with debt. Let us explore why some e-commerce business owners are not able to reduce the debts they are in even though they are making regular payments sincerely.
Your Payments Are Hardly Covering Interest
Interest is one of the main expenses involving the act of borrowing money. Every monthly debt repayment would be covering a specific amount of interest and a specific amount of principal. If you are paying a major part of your monthly repayment towards interest payment, it is quite obvious, that your debts are not getting reduced fast enough. You need to examine a billing statement to have a look at exactly how much was applied towards your interest in your last month’s debt repayment. It would also, be clear from your billing statement exactly how much was subtracted from your debt balance.
You could consider a couple of effective ways of combating this issue. Firstly, you could consider increasing your payment amount to make sure that more funds are diverted towards payment of your principal amount owed by you. Often paying extra toward your loan could advance your upcoming due date rather than reducing your overall balance. You must necessarily indicate to the authorities on the payment coupon itself that the extra money should go toward payment of the principal.
Secondly, trying to get a relatively lower interest rate could be another smart option. However, it is not so easy to execute this idea. In the case of your business or personal credit card, you need to talk to the credit card issuer about giving you a lower rate of interest or you may think in terms of a balance transfer to a relatively lower-interest credit card. As far as, loans are concerned, the only effective way of getting a lower rate of interest is by refinancing into another loan that assures a lower interest rate. In this context, you must understand that your credit history must be good so that you could be eligible for a relatively lower-interest loan. Remember refinancing does not come free and involves certain costs. So be sure to weigh all the costs before taking a decision. You may seek expert advice by contacting Nationaldebtrelief.com.
Your Payments Are Diverted Towards Payment of Fees
Fees would be impacting your debt payment in the same manner as the interest. Fees often prevent your balance from reducing even after you are making consistent payments toward the debt you owe. You need to eliminate certain fees from your repayment amount. However, for doing that, you must scrutinize the fees that are being charged. Thereafter, you could consciously avoid all those actions that may be triggering fees.
- You could avoid late fees by making timely payments every month. Schedule online payments and make sure the payment is done a few days in advance so that there is enough time before the due date to respond to emergencies or if something unexpectedly goes wrong.
- In the case, you are charged an extra fee for overshooting your credit limit by your credit card issuer; you could avoid this unnecessary fee by paying off your balance within the limit and constantly checking the credit available each time before spending.
- You may request your credit card issuer to waive off the annual fee. In the event, he does not agree with you, this should be the card that you need to give top priority and pay off at the earliest to get rid of unnecessary fees.
- You could consciously avoid transactional fees such as balance transfer fees or cash advances simply by steering clear of these transactions that demand such fees. Cash advances are really quite expensive since they are known to start accruing interest almost instantaneously.
You Are Still Generating Debt
In the case, you are still going on making purchases on your credit card or taking out fresh loans, it is pretty obvious that your overall debt balance cannot go down. In order to effectively reduce your debt burden, it is mandatory to stop generating new debt. Stop making any more purchases using your credit card.
Your debt seems like an insurmountable mountain and your budget looks like a shovel and you are most likely feeling really down and depressed thinking that only a miracle could help you in eliminating your debt. Fortunately, once you know why you are not able to reduce your debts effectively, you could take proactive measures to overcome your debts and march ahead towards a debt-free existence.
Guest Author Bio
Marina Thomas, a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including money saving, Budgeting, business debt consolidation, business and start-ups.