Dealing with Debt 4 - An Ounce of Prevention Is Worth a Pound of Cure

by: David Jackson

The best thing we can do to avoid ending up in a vicious cycle of debt is borrow wisely in the first place. By remembering three simple things before we borrow, we can keep our debt manageable from the start.

1. Shop around for the best possible rates. When buying a car or a home, we almost always compare several options before settling on one. We should always do the same when obtaining credit. Whether it is a mortgage, a car loan, or a credit card, getting the best rate you can get will end up saving you a lot of money in the long run.
2. Use credit wisely. If you can do without it, you’re usually better off paying cash for it. Many people keep credit cards for emergencies, only to end up declaring a state of emergency when those expensive shoes they’ve been eyeing go on sale. While one impulse purchase probably won’t hurt anything by itself, it can easily become a habit. And that spells trouble.
3. Pay your debt off as quickly as possible. If it’s a mortgage or loan, add a little extra to the payment each month if you can, or better yet make an extra payment every now and then.
   

For credit cards, pay off the balance in full each month. If that’s not possible, pay as much as you can afford. Paying only the minimum payment each month will keep you out of trouble with the credit card company, but it will also allow interest charges to build up. These steps sound easy, and they are. But it’s also easy to slip up a time or two.

When we do and it doesn’t cause any major problems, we often tend to become more lax on watching our credit habits. That leads to more mistakes, and those mistakes lead to more debt. If it continues, we can end up in too much debt.

Dealing with Debt 3 - How Much Debt Is Too Much

by: David Jackson

The amount of debt that is manageable is different for different people. It depends on our income, our bills, and how much money we need to save each month. But in general, it’s best to keep our total debts under 35% of our income. Bad debt is the most important part of the equation. Ideally, we should keep it under 10% of our income. Anything higher is a sign that you may need to reevaluate your finances.

Calculating your bad debt is easy to do. Simply add up your monthly credit card payments, auto loan payments, and any personal loan payments, then divide that number by your monthly income and multiply by 100 for your debt to income ratio. If you want to figure your total debt ratio, add in your student loan payments, mortgage or rent, and any other monthly obligations you have, divide by monthly income, and multiply by 100.

An Ounce of Prevention Is Worth a Pound of Cure

The best thing we can do to avoid ending up in a vicious cycle of debt is borrow wisely in the first place. By remembering three simple things before we borrow, we can keep our debt manageable from the start.

1. Shop around for the best possible rates. When buying a car or a home, we almost always compare several options before settling on one. We should always do the same when obtaining credit. Whether it is a mortgage, a car loan, or a credit card, getting the best rate you can get will end up saving you a lot of money in the long run.
2. Use credit wisely. If you can do without it, you’re usually better off paying cash for it. Many people keep credit cards for emergencies, only to end up declaring a state of emergency when those expensive shoes they’ve been eyeing go on sale. While one impulse purchase probably won’t hurt anything by itself, it can easily become a habit. And that spells trouble.
3. Pay your debt off as quickly as possible. If it’s a mortgage or loan, add a little extra to the payment each month if you can, or better yet make an extra payment every now and then.

For credit cards, pay off the balance in full each month. If that’s not possible, pay as much as you can afford. Paying only the minimum payment each month will keep you out of trouble with the credit card company, but it will also allow interest charges to build up. These steps sound easy, and they are. But it’s also easy to slip up a time or two.

When we do and it doesn’t cause any major problems, we often tend to become more lax on watching our credit habits. That leads to more mistakes, and those mistakes lead to more debt. If it continues, we can end up in too much debt.

Dealing with Debt 2 - Good Debt vs. Bad Debt

by: David Jackson

Yes, there is such a thing as good debt. There are only a few types of debt that fall into this category, but it’s important to make the distinction. Some examples of good debt are:

* Debt incurred to buy a home Avoid Foreclosure – Owning your own home has numerous benefits. But the reason that this is considered a good debt is because a home is an investment. It gains value instead of losing it, so you’re putting yourself at an advantage by going into debt as long as you keep your payments current.

* Student loans – Getting a college education is a good investment as well. By earning a degree, you put yourself in a position to earn more money over your lifetime.

* Debt associated with starting a business – Starting your own business can be a risky proposition, but it’s done with the intention of earning money. However, some of the assets you purchase will depreciate rather than appreciating. But for practical purposes, you can consider this a good debt.

There are lots of examples of bad debt. Here are a few:

* Auto loans – Having a car is a necessity for many, but a car loan is still considered bad debt. An automobile loses value over time rather than gaining it, so when it’s time to sell or trade you will not recover your investment.

* Credit card debt – Although credit cards can feasibly be used to purchase things that appreciate, they are in general considered bad debt because of the types of things that are usually bought with them. The overwhelming majority of credit card purchases are things that lose value.

* Most personal loans – Personal loans are often taken out to finance purchases of things such as appliances, furniture, and vacations.

These are often things we need, and a vacation can even help us become more productive, allowing us to potentially earn more. But none of these things appreciate in value, so they are considered bad debt. Just because a debt is a so-called good debt, that doesn’t mean it can’t get us into trouble.

It’s important to keep our good debt at a manageable level. Lenders take our income into consideration when lending us money for this reason. But it’s also crucial that we look at our individual situations and not borrow more than we can comfortably pay back. On the other side of the coin, bad debt is not necessarily taboo. There’s no harm in taking on some bad debt to get the things we need and want. But the smart thing to do is keep it to a minimum, only using it for things we really need.

Dealing with Debt

By : David Jackson

Debt is a four-letter word to many people. It’s a major source of stress for an ever-increasing number of consumers. But unless you’re independently wealthy, debt is usually a necessity if you want to make a major purchase such as a home or an automobile. Consumer debt is on the rise, and so are delinquencies. More and more consumers are turning to credit counseling to get their debt under control. And even with the tighter restrictions on bankruptcy, people are still filing. These statistics paint a grim picture of debt, yet consumers are still using their credit cards and taking out loans. The fact is that debt is not such a bad thing in and of itself. It can help us get the things we need and want. The problem lies in accumulating too much debt. If we’re not careful, we can get in over our heads. And once we do, it becomes harder and harder to get out of debt.

By educating ourselves about debt and determining what is a safe level of debt based upon our income, we can avoid falling into a debt trap in the first place. And if we’re already in too much debt, there are steps we can take to reduce it.

The Benefits of Debt Relief Educational Services

By Ridwan

If you want to reduce or cleat your credit card debts, you may want to engage yourself with an educational services debt relief programs. You will be educated on how you can manage, restructure, extend, and negotiate your payments with your credit card company.

These services provide you the knowledge to be able to achieve the best debt relief for your financial stability. They have employees that provide educational services on how you will be able to achieve a debt free status. You will also learn the different strategies on how you can empower yourself with the knowledge of becoming financially secure in the future.

Now that you are equipped with the right education provided by an educational service debt relief, you will learn how to become financially independent and stay out of debt. You may find yourself with a bad credit score. You may find many ways on how you can improve your financial status. Here are some things that you will be able to apply in case you encounter problems in settling your debts due to a bad credit score or high interest rates on your credit cards.

1. Learn how to negotiate with your credit card company. You should be able to contact your financial institution to change your plan of payments since you are having difficulties with the high cost of interest on your credit card.
2. If you want to establish a clear credit, you should be able to provide your credit company a copy of your open checking and savings account. This will serve as your proof that you manage your money wisely.
3. You may ask assistance from a credible credit counseling service on how you can change your credit card plan to a card that will allow you to pay low interest rates.
4. You should pay regularly on your bills. Make sure that you are paying on time so that you will avoid penalties on your credit card.
5. You should transfer your savings account to your current account. You may reestablish your credit rating by making full payments regularly. The longer you pay your bills, the longer you will reestablish your credit rating.

You should always maintain a good credit score to maintain your status as a good payer on your credits. These are some important things that you will learn when you are well educated by a good educational service debt relief program.