Article posted by PortellHoak as Debt Consolidation
Being debt-free is a dream for most of us. Imagine no credit card bills or monthly payments. And yet more people are in debt today than ever before. It seems like living on credit is the only solution to keep your head above water in the current financial climate. However, getting out of debt is not an impossible dream and can be achieved by following a few basic pieces of advice. Here’s how.
The first thing to do is have a long look at everything that you currently paying off (or trying to pay off!) Some payments are actually far more dangerous for your financial health than others. Some things that are purchased on credit, such as property, tend to appreciate in value, meaning that paying off a mortgage or property loan is not necessarily a bad long-term investment. Rates are also generally well under 10 percent interest, meaning they aren’t likely to spiral out of control.
A car loan doesn’t fall into the same category. Unless you are buying a classic automobile, your car isn’t an investment that is going to increase in value. However, it is very probably a necessary debt for many families.Other debts can be considered bad. Rates that are well over 10 percent (and sometimes over 20 percent) should be avoided.
So how do you go about getting out of debt? There is an age-old piece of financial wisdom that says you should always spend less than you earn. Seems obvious, doesn’t it? Before dismissing this advice out of hand, remember that this is the only guarantee of never being in debt. If you can’t pay for it with with your salary, you really can’t afford it. Once you are doing this, you can start working on eliminating other problem areas, such as credit cards.
Credit cards are a constant temptation, with rates that are, at least first glance, very tempting. However, you should read the small print. Sometimes over the long-term that low rate can work out very expensive indeed. Nobody needs more than one credit card and it should be kept for emergencies, not for day-to-day purchases. The best way to remove temptation is to cut up any other cards you may have. If it isn’t there, you can’t use it.
The second quick-fix solution might seem a contradiction and it is to pay off as much as possible on one debt. This doesn’t mean letting other repayments go. You should find out exactly what the minimum repayment on all your bills and debts is. Then promise to pay off this minimum amount every month. Any additional money should be put towards just one outstanding loan or debt. It is far easier to work on getting rid of one problem at a time by throwing as much of your resources as you can at it, rather than chipping very slowly away at everything which is long and can be depressing.
When deciding which problem to attack first in the quest for getting out of debt, it is important to be proactive. It is surprising how many companies are prepared to renegotiate a debt. They would rather have repayments at a lower rate than have nothing at all, especially if they believe that this will help to keep you as a customer. They are aware that there are many other credit companies who are looking to take over your debts, so a slight reduction to their rate can be in everyone’s interest This can be a somewhat uncomfortable experience, but stick to it, it is worth the effort.
Even while making every effort to pay off your debts, don’t forget about the power of saving your income whenever possible. It is always tempting to put everything extra towards a credit card bill, for example, but you should stick with the method of just paying off one debt as a priority at a time. if you do find yourself with a bit extra one month for whatever reason, save it. The reason why people get in debt in the first place is lack of money saved to cover emergencies. Don’t fall into this trap again.
Getting out of debt requires discipline and a plan of action, but doesn’t need to be complicated. Following these steps should see you on the right track to financial stability in as short a time as possible
Author: PortellHoakThis author has published 13 articles so far. More info about the author is coming soon.