Getting High Interest Debt Under Control
How do you control high interest debt?
First let's look at your net worth. The definition of net worth is your assets minus your liabilities. Liabilities are debts, everything you owe. The more debts you have, the lower your net worth will be. Additionally, whenever you have debts, you also have to pay interest, so that is why you lose more.
There are practical reasons why many people need to borrow. For example, to buy a car or a home. It is often difficult to find your own ready cash to pay out for big expenses. That is why debt is a tool which, when used wisely, can be of real benefit to the borrower. But - and it is an important 'but', the borrower must understand that a debt is still a debt and it must be repaid in due time - with interest.
When people do not manage their money well, they get into financial trouble. And it gets to be a vicious cycle... They run short of cash, so that’s why they borrow. Then they are not able to stick to a budget so they can’t repay the debt.
The main reasons why people get into serious debt are:
- High price of medical bills.
- Settling divorce costs.
- Spend-aholic or cannot control spending.
- Unable to save money.
- Not being knowledgeable about financial and credit matters.
On the subject of health, prevention is always better than the cure. And the same holds true for money matters - it is better to save for a rainy day. Here are some tips:
- Make a budget and stick to it. When payday comes around, set aside an amount for the bills that must be paid as soon as possible. This includes setting aside some of your income for credit card debts.
- Save 10% of your salary for emergencies. You don’t know what might happen tomorrow, next week or next month.
- When you are faced with a choice of buying a purchase for a lower and
- practical price, then go for that one. Think, think, and think again before investing in something.
- If you must borrow, carefully research the loan. Study the interest rate and the penalty fees. Then after borrowing, be sure to make a budget of how much you can save so that you can repay the debt promptly.
You can control your credit card debt by carefully checking out the interest rates of any loan you’re considering to sign up for BEFORE doing so. Interest rates do vary and it is important that you get one where you will not lose as much.
As far as possible, have just one or two credit cards. Too many credit cards in your wallet can encourage you to buy something you really don’t need. You just buy it on impulse because you know you can. However, you are not sure whether you can repay your debt when the time comes.
If you want to cut down on high credit card bills, consider this:
- Pay cash instead.
- Limit your charges. Record it carefully and do your best not to exceed that amount. It is very, very important to always keep track of your expenses. Always, always keep track.
- Select the credit card which offers you the lowest interest rate and has no annual fee.
- Just because you are receiving a free gift or a discount on a purchase, you will sign up for that credit card. This is their marketing strategy for possible customers. Resist that temptation!
- Most importantly: pay bills on time. That way you will avoid late charges and additional interest.
Bear this in mind: if you do not pay your debts on time, it will be reflected in your credit history. This can result in you having a difficult time borrowing money next time. Banks and other credit lenders check your credit history before they grant you a loan. Creditors look at the recent 2-year history and if you have credit record that includes many late payments, delinquencies or defaults may mean that you won't get the loan.
To make it simple, in order for you to invest, the best advice we can give is to select the right loan.
Look for the lowest interest rate. The interest that you save can be spent on other investments.
Studies show that increasing your monthly repayments can shorten the payment term on your loan. The longer you wait, the higher the interest you are paying. Besides, signing up for a shorter payment term means less pain when it comes to producing the money to pay the debt.
The key is to maximize your net worth by minimizing your liabilities and maximizing your assets. Be sure to know how much you have and work carefully on ways to increase it without losing much of it just paying for debts.
Now click here for the next step in your free credit relief guide : Credit Union Loans.