Newlyweds: Get Out of Debt (and Stay Out)

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Worried couple with billsBetween the dress, the engagement and wedding rings and paying for the venue, photographer and honeymoon, the cost of hosting a wedding is exorbitant. In fact, the average wedding cost $28,427 in 2012, according to a survey conducted by TheKnot.com and WeddingChannel.com. Prices ranged from $76,687 in Manhattan to $15,504 in Alaska—but no matter where you live, this is a pretty steep bill for an average couple trying to start a life together. If you’re excited about getting married but anxious about the bills, balance your enthusiasm with some sober strategies for getting out of debt.

Reduce Mortgage Debt

For homeowners, mortgage is typically the largest debt. In some circumstances, you can lower your monthly bill and increase cash flow by taking advantage of lower interest rates and refinancing options. If you have an adjustable rate or balloon mortgage, you might switch to a fixed-rate loan to lock in lower interest. Or if you have a long-term loan, a refinanced rate may enable you to more quickly repay your balance, decreasing interest and building equity. You should note, however, that whether or not refinancing will save you money in the long run depends on factors such as refinancing charges, prepayment penalties and how long you plan to stay in your home.

You may have other options for paying down your mortgage debt. If you’re entitled to structured settlement or annuity payments, companies like J.G. Wentworth may be able to buy your future payments for a lump sum of cash now. You can then use this money to help pay off your mortgage or other debts.

Repaying Student Loan Debt

In 2012, student loan debt passed auto loans and credit cards to become the second-biggest obligation after mortgages, the Federal Reserve Bank of New York reported. The graduating class of 2012 averaged $29,400 in student loan debt, according to Project on Student Debt.

To help students and graduates manage these rising costs, the Education Department has created an online Federal Student Aid guide, designed to assist with navigating repayment plan options and exploring hardship deferment and other forms of assistance.

Cutting Credit Card Debt

In 2013, consumer household credit cardbe debt averaged $7,128, according to Federal Reserve data. When deeply indebted cardholders were factored in, this rose to $15,279, making credit cards the third-biggest debt source.

To get out from under this type of debt, call the credit card companies and try to negotiate a lower interest rate. You’ll find negotiating a lower rate easier if:

  • You’ve been paying your bills on time
  • You call knowing what the current prime rate is
  • You’re committed to taking the time to speak to a supervisor (if necessary)
  • You’re willing to follow up with a letter or call back in a few months (again, if necessary) to get results

In addition, be very wary of those “blank check” offers from your credit card companies. Oftentimes they just add significantly to your outstanding debt.

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