There is no rule of thumb in choosing what payment strategy to employ. It will greatly depend on your current financial situation, plan and priorities. One approach has its own advantages and disadvantages compare to another. Try to evaluate each strategy and see for yourself which one makes sense.

There are credit card companies that will raise interest rate for just one late payment of bills. It is better to avoid any additional fees or charges that will apparently add to your total debt payments. Try your best to meet up the minimum payments on all your debts and you will be surprised how little by little your debts start dropping. It will also motivate you to keep on going with your payment strategy until the time you get out of debt.

For people with enormous total debts, high interest rates make it more difficult to get out of it. You can talk to your credit companies and discuss some options to lower the interest rate. One of the most frequent used rate reduction programs is loan consolidation. Reduced interest rates means increased in payments on credits’ balances with no increase in total payments.

Assuming you owe $2,000 on each 3 debt accounts. The interest rates are 10%, 14% and 20%. Paying the debt with the highest rate will save you more in interest payments over the succeeding years than paying the debts with lower rates. This strategy is simply keeping your total interest payments to the least amount as possible.

There are people who just can’t stand the sight and effect of various monthly payments coming in and it keeps them more upset. If this is your case, you may want to try this strategy. Pay the debt with the lowest balance. In this way, it will trim down the number of payments in an instant. For example, if you have outstanding balances of 5 debts accounts with amounts of $300, $500, $3000, and $4000, pay up the $300 and $500 debts and you are instantly rid of 2 payments. To some people, it means they just have to worry 2 more debts instead of 4.

You may ask “Why pay $500 if I am only required to pay $300?” the answer is simple. The less you pay on your debt payments the longer it will take you to get out it. Some credit companies even lower their interest rates and claim that this would help their debtors with their financial crisis. But on the other side this is also another way to encourage people to pay just the minimum amount knowing that their interest rate is “lowered”. This will result to more income for credit companies and longer debt maze on your part.

Internet payday loans are easy to locate using any kind of search engine. Payday lenders have their ads placed in many other sites and they obtain people’s emails to send their advertising pitch to numerous inboxes. Internet payday loans are hyped as the convenient and fast solution to a financial shortage. But this is the exact opposite. Payday loans lead to a worse financial situation. This can be immediately seen if attention is paid to the contracts that internet payday lenders give to their borrowers. Here are typical features of a payday loan contract.

One feature of a payday loan contract is called the arbitration clause. It is a legalistic term but it simply means that if there are disputes between the two parties making the contract, this dispute must be settled outside the court, in a pre-chosen state or nation, and before a pre-chosen group of people who will make a decision. This means that if the borrower wants to challenge the actions of the payday lender, this will be discussed and decided upon in a place that could be hundreds of miles away from the location of the borrower. The laws of the state where the payday company wants to hold the arbitration would be different from the laws of the borrower’s state. Worse, the arbitration could be held in another country. The expenses alone would deter the borrower from pursuing his issues against the payday lender.

Then, the arbitration procedure can be held in front of an organization or a group which could be biased in favor of the payday lender. A dispute is usually best settled in court where the chances of a fair decision are high. But with the arbitration clause, it could be held before people who may have already decided to protect the interests of the payday lender.

Another feature of a payday loan contract is a statement, which refers to the borrower’s agreement to never be involved in a class action suit against the payday lender. Many borrowers often disregard this statement believing that there will be no reason to file charges against the payday loan company. Tragically, there are many possible reasons. For example, some internet payday loans are automatically renewed every two weeks even without communication with the client. This means that the payday lender immediately withdraws the finance charge from the borrower’s bank account. To give a stranger such easy access to a personal checking account should be disturbing enough.

And still another feature of a payday loan contract is the agreement on the part of the borrower to never proclaim bankruptcy. In many respects, claiming bankruptcy is bad news because the borrower’s credit history is smeared and the borrower will have difficulty obtaining loans. But bankruptcy is also a financial move that an honest person can take when he finds himself unable to meet all his financial obligations. In the payday loan contract, bankruptcy does not become an option. This means that the payday lender can still make electronic withdrawals for the finance charges because the borrower’s account is obligated to remain open. With insufficient funds, both the bank and the payday lender can charge penalties.

Clearly, the contracts of internet payday loans are one-sided and always in favor of the lender. The borrower must realize that he faces many financial, security, and legal risks each time he obtains a payday loan and signs that dubious contract.

Sometimes we do not have to look far to search for answers. The answers we are seeking out might be just in front of us or within us. Your greatest competitor is yourself. If you are having a hard time getting out of debt maybe because it is you that is keeping it tough. Below are simple yet very effective approaches to finally realizing that priceless feeling of being debt free:

Strategy 1: Know thy credit card

Even before you apply for that magical credit card that you have always wanted you should have known the important details. Such information includes maximum credit, interest rate, minimum payments, monthly fees, charges for special services, and other fees. Whether you like it or not these numbers have a significant impact on your billing statement. That is the reason it pays to know. The more you know, the more aware you are with its effects and consequences. When your head is already six feet under because of debts, you can have better alternatives if you are familiar with various debt reduction programs, assuming that your credit card company offers one. Recognizing your credit card’s capacity and limitations is identifying your own with regards to financial capabilities.

Strategy 2: Spend wisely

It is not how much you earn. It is how much you save! Cut down unnecessary expenses. It may seem impossible and unbearable to live without your mobile phone, weekly dinners, cable subscription, latest designer clothes, vacations escapade, etc. Consequently, you will be able pay more than the minimum payment and save additional cash if you learn to control this extra spending. Learn to deal with temptations.

Start saying no when family or friends ask you to swipe that magical card for not so important wishes. Saving also means cash on hand that you can use for unexpected expenses. Regardless of the amount, the money you save now can save you from future and serious problems.

Strategy 3: Look for extra jobs

In very rare cases, it is impossible to cut down some expenses because of its necessity or urgency. It is also sometimes difficult to predict and minimize unexpected expenditures. The next best thing to do is find additional source of income. It could be part-time and contractual jobs or any professional service you could offer. This is the time to take your job and other skills or talents seriously. Additional money means additional capacity to pay more debts and chance to get out of it but this not an assurance. There are people who splurge more knowing they have more money to spend which means added debts and longer time to recover from financial crisis.

The strategies discussed above apply mostly to general cases. There are instances when other options or strategies are better, that will depend on your personal circumstances. The main key point here is your commitment. Your determination to get out of debt will be the major driving force that will motivate and guide you in continuing all your efforts.

Payday loans give the impression that the interest is reasonable but when this interest is converted into annual percentage rates or APR, the interest balloons out considerably. The annual interest of payday loans could be six to eight times the loaned amount. This means that if an amount of $1,500 is borrowed and this loan is not paid for a year, the borrower has a financial obligation to settle a total amount of about $12,000.

The high interest rates of payday loans should be enough to create a knee-jerk reaction when someone gives a name of a payday lender. But there will be times when immediate funds are needed and payday loans beckon like a siren call. There are ways to steer clear of payday loans and here are some suggestions.

When immediate funds are needed, there are other sources of cash or loan that can be tapped into. For an employee, the most obvious source of money is a cash advance from the employer. Most employers are aware that unavoidable circumstances can place an employee in dire need of cash. This is why the concept of cash advance was invented. An employee should look into the employer’s policies regarding cash advances.

Another source of money is a loan from a family member or from a friend. Brothers and sisters may not be the most sympathetic people to approach when one has a financial crisis but they certainly do not charge high interest rates. Social mores also frown upon the idea of borrowing from friends. But friends also do not charge high interest rates.

To make the loan from either family or friend less of a charity and more of a business transaction, create a written agreement about the loan. The agreement need not imitate the legalese of loan contracts. It needs only to indicate the amount loaned and the promised date when the loan will be paid off. In some cases, the written agreement may indicate an extended method of payment in which dates are listed together with the amounts to be paid on those dates.

The other sources of emergency cash can be small loans coming from credit unions or cash advances from credit cards. These loans charge interests but their APR is several times lower than that of payday loans. When considering a cash advance from credit cards, it would be advisable to choose the credit card that imposes the lowest APR on cash advances.

Of course, the best strategy to steer clear of payday loans is to avoid situations in which cash is needed and there is no saved money available. To avoid such situations, there are a number of things that any determined person can do. The first of them is creating a budget in which the expenses should not be higher than the earnings. Spending less is all about living below your means and preventing the self from buying stuff that are not really needed.

Another technique is to set aside savings first before creating a budget. For example, an amount of $50 is placed in savings from every payday. The savings will accumulate and will become the best source of money in times of emergency.

The financial danger of payday loans cannot be overemphasized. A sensible and rational person should consider alternatives to obtaining funds rather than getting a payday loan.

You cannot manage something you cannot measure. But it does not necessarily mean you should have all the details to have a good start. The initial things you should be aware of to re-establish your financial existence is to calculate how much you owe, how much you earn and how much you spend on a given time period.

The end result may shock you but it is better that way before it is too late. Get a pen and paper and start listing all your debts. Include every debt from mortgages, loan payments, insurance, utility bills, to travel expenses. Also, take note how much is the interest rate and minimum monthly payment for each debt. Having all these important information will help you manage your debts and make better decisions.

Obviously, you need a source of income to pay up your debts. If you have extra and part-time jobs I guess it is time for you to take it seriously. At least estimate how much is your expected earnings from each job on a monthly basis. Combine it with your monthly salary from a regular job.

Unfortunately, it is not only debts that you have take care of, at least for now. Your expenses should account for all basic needs such as food, rent, utility expenses, gas, etc. Up to this point, you should already have an approximation of your capability to pay all outstanding debts.

This is the point of no return so brace yourself. Deduct all your expenses from all income and it should give you the remaining amount you can use to pay off your debts. Hopefully it is a positive amount. If it is, then it is a good sign. If not, that is another concern for you to be worried of. It is also possible and recommended to use part of the remaining amount to place in savings. You could use it for future unexpected expenses - one probable reason that caused you incurring debts.

If you reach this point you have a reason to celebrate so do not lose the momentum. Check all details of each debt and prioritize which one to pay first. Be sure to make a commitment to pay regularly. It may take years to reduce and wipe all those debts but it is better than adding more to it.

Getting out from the rat race of debt payment does not require sophisticated strategies. As simple as knowing your total debts, income and expenses can help you find and formulate better options. These practical initial steps of course should be accompanied with other useful information such as payment policies of your creditors, and the different credit options you could avail. Most importantly, you should have the right attitude and mind-set to be victorious in getting out of debt.