Credit and Debt Management: 6 Ways to Conquer Your Debt
Almost everyone is somehow entangled in some sort of debt or probably almost sinking into one. The need to take a credit card loan is often because of issues that are unforeseen and which need urgent attendance or for which we create unwarranted urgency just because we have the cards. You are liable to a certain amount of debt with regards to your credit score. The higher your credit scores the higher the amount you qualify for.
The most common debts people find themselves are mortgages, student loans and of course credit card balances. Your credit score is affected by the way you make payments and handle your debts. Most people struggle with paying their debts in time and thus opt for debt consolidation services to settle many card debt loans in one go and remain with one loan with a low interest rate to pay off monthly or as per terms agreed on by the debt consolidator. But debt consolidation loans are not always the best for everyone. In as much as it might be a great strategy in some situations, it may present a totally different in other situations which may lead to incurring more costs and making your situation worse.
Out of experience and depending on the unique situations our clients find themselves in, we usually advise that they consider credit and debt management services which may present a more relieving strategy when looking to clear your debts. But what is debt management? This is an option whereby you negotiate with your financiers for more affordable payment terms. Here are six effective tips to conquer credit card debts using debt management as a tool.
Pay your mortgage loans in time
Mortgages are among the largest loans many people find themselves and are often looking forward to digging themselves out of the loans fast. Paying off these debts in time not only gives you financial freedom but also comes with a relieving peace of mind. Making your payments early will save you a lot of money in interest. You can choose not to go as per your financier’s biweekly mortgage plan and use this to save money. If you can, forget the escrow requirement from your financier and use that money to pay taxes and your insurance. Another option to clear your mortgage fast is to go for a shorter loan term or one that comes with lower interest rates. With this option, you will get the loan off your back fast and regain your financial foundation in a few months.
Strategize and categorize
It is important to understand that not all loans are bad. But the question to ask yourself should be ‘is it really necessary?’ It is vital that you sit down, strategize and think critically about what you are planning to get yourself into. For instance, a loan to further your education with the hope of getting a higher paying job is a good investment because you have an idea on how to pay it back. On the other hand, if you are going for a loan that will help you secure a new home or a new car without a clue on how you plan to pay the loan back is a bad debt. Evaluate the debts before you get into them and plan on how to pay them off. If it is not worth it, don’t get into it.
For instance, if you are looking to acquire a new home, you need to carefully set a plan that will get you a house and that plan should be within your financial means. And if you are planning to get a car loan, your repayment plan should not drag you for more than 3 years. This is because cars are depreciating assets and even in the event you choose to sell it off, it will never be higher than the amount you paid it off at. Whatever any lender tells you that you are eligible to borrow is not important. What lenders care for is the interest they get out of the loan and they usually care less to know of your financial standing or repayment plan. When borrowing, it is wise to go for the least amount and pay in the least period of time.
Shun the credit and debt cycle
As long as you keep making loan payments, you will never amass wealth. To manage your money well, stop getting into debt. Try to avoid using your credit cards and borrowing money that is not necessary. Remain focused on clearing your debts and even reward yourself for the times you shun the debts. If you some disposable income, rather than settling loans, use that to invest. This is how you will begin to create and build lasting wealth.
Pay more than the agreed minimum monthly pay towards the loans
In case you have only been paying off your minimum loan payments, you will live your entire life paying off loans. Or, you’ll only be paying off the interest on the loan and not the loan itself. Making extra payments will see you cut down on the principal balance faster and you will also save on interest charged on the loan.
Pay off the largest debts first
All loans are always painful to deal with. However, there are those that draw your emotional impact. If you are not emotionally astute it can be very difficult to be productive even in other areas of life when you have a huge debt weighing you down. Quickly pay off such loans that drain your emotional energy then deal with the smaller loans later.
Getting into debts is at times a necessary evil we cannot avoid. However, with the 6 tips outlined in this post, we now know better. Credit and debt management options allow you to find better ways to clear your debts and get back on your feet. The buck stops with analyzing the kind of loan you are planning to take and the repayment plan you have for it.