Sometimes debt is unavoidable; other times it is perfectly avoidable yet we still find ourselves trapped in it’s grip. No matter how you ended up in debt, there are some simple rules to abide by in order to live with your debt and more importantly to eventually escape your debt. Some choices you make in regards to your debt management will help you immensely, others will only leave you in more debt.
Keep in mind that some decisions made before a debt is a reality are decisions that can mean the difference of a debt that is quickly paid of and years of penalty fees and payments.
Here are some tips on debt management:
When preparing to sign for a loan, mortgage, or similar things always read the fine print. Don’t agree to interest only payments, loans with unusually high interest rates or unrealistic payback terms, or sign for money that you can earn or save up soon enough for what ever it is you need.
Never pay just the minimum on your credit card statements. The average minimum on today’s credit cards is 10 dollars. If you have a credit card that currently has a balance due of 500 dollars it will take you 50 months (That is over 4 years!) to pay of the balance excluding any additional charges you rack up and excluding your interest that accumulates. On the contrary, if you pay 50 dollars a month into this debt you will pay it off in about 10 months and save quite a bit in interest.
Never use cash advances or payday loans. Both carry high interest rates and strict payback terms. Plus doing this can set the trap for an endless cycle of borrowing money to pay for the now, then having to do it all over again because you owe for the past.
Don’t ignore debt. If you can’t make a payment make sure you contact your credit card company or loan provider to see if an agreement can be worked out. Many offer deferment plans, protection against fees for a missed payment, and so forth.
Do limit your spending. Even though the plastic might have a $1,000 dollar limit on it does not mean it is all yours to spend. If you don’t plan on paying it off at the next bill, then you shouldn’t be using it. Plus by keeping your credit line open you can use your credit card with no hassle in an emergency situation.
If you have credit card debt or payday loan debt, make it a priority to pay it off as quickly as possible. These kinds of debts have the highest interest rates so it is in your best interest to pay them off fast. Otherwise interest can accumulate quicker then you can make payments and you’ll be stuck in an endless rut of paying money to these companies.
– Don’t go for interest only payment plans once again. Many people fall into the trap of home loans and mortgages that offer the lure of interest only payments for a certain number of years. People get comfortable paying that seemingly low payment then suddenly that time period ends and the payments can quadruple leaving many unable to pay.
These are some basic, common knowledge dos and don’ts of debt management that can help you get out of debt quicker and also help you to make smarter choices when taking on debt. Debt is always manageable and there are always options available to help with debt, however if you can take control before it gets out of hand then many of the most extreme options for debt help will never be needed.