One of the most common situations that every American is going through is debt management. There are thousands of experts who claim to give the best debt advice. However, most of them shy away from the fact that debt is not going to fade away by a simple magic trick. One of the major reasons behind the debt trouble in America is the high number of credit cards, mortgages and student loans which take a toll on our finances and make it difficult to repay our loans as time passes by.
The debt on a household is more than ever due to the above problems. Plus, an economy which thrives on debt build up, encourages us to ask for more of it, creates more ruckus in our finances. With unemployment ranging high in the country, it will be unfair to ask for a debt free America. You may not be happy to know that more than 10% of the pay checks issued by Americans are used in debt settlement. Last year Trump was heard saying ‘I would borrow, knowing that if the economy crashed, you could make a deal. And if the economy was good, it was good. So, therefore, you can’t lose.’ Such a statement was not welcomed by economists who are hinting on big economic changes as he is the president now.
Type of debts
Generally, every debt can be categorized under the good debt and bad debt shelf. If we consider the good side of debt it includes those investments which are long term and add value to your life. One of the best examples of such debt is mortgagees as they have the tendency to appreciate the prices of the assets with time. You can also count student loan as a good debt because it is will be the reason for your future earnings. To define a certain debt as a good debt it should be a necessity, the monthly payments should be convenient and it should get cleared within a comfortable period.
On the other hand, a bad debt can be easily described as a deal through a credit card. Car loans and medical costs can also be included in this category. Such a debt can be defined as the one which is not taken out of sheer willingness to pay for a necessity, the monthly payments are paid through struggle and the payment period is not defined.
How to deal with debt?
Professional’s debt advice includes some points that should be taken care of in management of debt crisis. Some of the points are stated below.
Be honest
To cure the debt problems, you must face the facts, no matter how harsh they sound. To get help getting out of debt you must stand up and look at the problems without shying away from their consequences. Put things in order by collecting all the papers related to your debt like bank statements and ignored bills. Then, write down all the debts you must pay off and their importance. Once you get to know this aspect you will be able to prioritize your debts.
Budgeting
Then, you must figure about the total amount of money you can spend each month to settle your debts. Your total income and your expenses will let you see the clear picture of your financial status. Eventually, you will be left with the amount that can be easily used to pay debts. You can also create a repayment plan to suit your needs and pay debts accordingly.
In matter of moments, you will be able to know the luxuries you can cut back to save more money.
Managing credit card
If possible you can stop the use of credit cards that are expensive. You have to find out if you can transfer your money to a card that is operated at 0% balance. Such cards include offers that nullify the interest charges for a smaller period so you can be sure that your money is strictly being used only to maintain your balance sheet. You just must be clever enough to use such cards and repay the debts within the period of the specific offer.
In case short term payments are not possible you can go for credit cards that are low on interest rates. It will save you from the high rate of interest common credit cards possess. To apply for such cards your credit history should be spotless. Make sure to know about your standing in the credit card companies before going for such cards.
Use overdraft
Overdraft option can cost you a lot of money if not used rationally. In such a case, you can opt for an overdraft facility which has an interest rate of 0%. There are many banks that come up with such options from time to time. You just must keep an eye to grab these offers and make the most of them. The bank will check your credit holdings and your record before allotting you such special leverage.
Personal loan
If you can find a deal when the rate of interest is lower in market. In this case, the APR will be much lower when compared to your credit card which makes personal expenses more less of a burden. One disadvantage with such deal is that it is lucrative enough to catch your interest and increase your debt. You won’t find such an offer with your existing bank so look out for other banks that are hungry for customers.
It’s a matter of fact that many debt crises happen due to our inefficiency of managing our accounts. Paying off debt can be a hard task if you do not consider the options stated above. You can also take debt advice from various experts who can help you in maintaining a balanced portfolio for a small fee. It’s better to get out of debt as soon as possible. You cannot enjoy your life or think about savings and investments with debt on your shoulders. To plan a brighter future, pay off your debt as soon as possible and then enjoy the fruits of your hard work.