admin December 16, 2015 No Comments

Millions of people are using credit cards more so than ever before.  However, credit card debt is vastly becoming a major problem for almost every household and it isn’t difficult to see why.  Credit cards are tempting because they can be used in the toughest of financial spots.

Families use these during the Christmas period, more than any other time of the year; and college students rely on cards when money is tight.  All in all, debts pile up from deaths and personal problems and of course the cost of living is rising daily.  Average households have debts of over fifteen thousand dollars and the worst part is debt continues to follow you.

Getting Control Is the Hardest Part

As most will know, when you have debt you are in a financial hole; there are times when you want to pack up and get as far away.  It can have such a negative effect on an entire family because the stress of money worries and fears of being able to repay a debt mounts.  However, getting free from debt isn’t impossible and even if you have tens of thousands of dollars worth of debt, you can repay and get free.

Becoming debt-free is not easy unfortunately however, that is one of the main reasons why more are now turning to consolidation loans.  These can actually be useful because what happens is that a consolidation company will take every one of the debts, combine it into one monthly payment.  Hopefully you will end up paying less interest for the one loan rather than all debts and be able to repay quicker too.

Secured Debts Are the Most Important Debt to Worry About

A lot of people will say every debt is just as important as the next and while that may be true, secured debts are terrifying.  The reason why is down to the fact when there is a secured loan, certain items such as a vehicle, home or personal property can be collateral and if it isn’t repaid, the collateral will be taken.  For that reason, secured loans and debts are the first debt to be repaid.

However, if your debts are secured by crazy items such as expensive cars you cannot afford or televisions, forget about it.  You have more important debts to worry about.  Let’s say your secured loan had the family home as collateral; this would absolutely be your first priority.

You may also have credit cards but right now your home is top priority.  Remember, unsecured loans are a little easier to work with because there is no threat of the home being taken away.  They still should be paid of course but you can work with the banks or credit card Company to give you more time.  Higher interest may be added.

High Interest Rate Credit Cards or Loans Are a Top Priority

You need to look at what you’re paying out when there is several loans or credit cards under your name.  Every loan has a set amount of interest added each month and it’s crucial to look at the debt with the highest interest rate.  A lot of people would say you should pay back the smallest debt first however, when you leave a high interest debt more interest is added and it means you have to pay back more.  Instead get these high interest rate cards paid off and gone.

Do Not Default

Whatever you do, never default on any loan or credit card.  This will haunt you for the rest of your life because it lasts on your credit report for at least seven years.  When you default you are less likely to be able to take out a loan in the future.

Make the Minimum Payment At Least

You may not be able to pay a great deal back at one time however even if you attempt to make the smallest payment each month, it’s a start.  Credit card companies and lenders love when they receive money and even if it’s just the minimum payment that is still good.  Yes, you will take longer to repay the debt off however the most important thing is that you aren’t actually defaulting or missing a payment.

Decide What Is Most Important

Everyone has their own opinion over how to deal with debt but the truth of the matter is you are the one who needs to make the decision.  If you want to tackle the smallest debt first, go ahead and get it cleared; or if you prefer to consolidate the debts into one so be it.  It really is your choice and you are the one who must carefully decide which route to take.  After all you are the one making the payments.

You Need a Plan of Action

You need to decision how you will deal with the debts.  So, you need to decide which debt takes the priority and understand what your outgoings are each month and what is coming in.  Hopefully you can budget well enough to contribute a little extra to the first debt; and doing this will help to get the debt paid back quicker.  Once it is, you now technically have extra money to put towards the next debt, all the while making minimum payments to the others.

To help you remember to pay the debts on time, you can set up a standard order with the bank to directly pay the lender on a certain date.  This is certainly wise and may help ensure your credit stays on track too.

What about Savings?

As tight as money is, you should try to put money away for a rainy day.  Now, this doesn’t have to be a great deal, $5 a week or even a month and while it doesn’t seem much, it can be useful.  Of course, if money is so tight it just isn’t possible, fair enough.  Hopefully the debt will be paid back soon enough and you will be able to put money away for the future.

One thing to remember: when in debt, never give up.  You will overcome it and even if it takes another twenty or thirty years you will be debt-free one day.

 

 

In the long run, if you pay off debt, you will be better off across the board.

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