The only way to avoid debt problem is to stay out of it, but for many of us who don’t have Gates or Buffett for a surname, it is a necessary evil sometimes. Well, who pays in cash for a house or car nowadays? Likewise, when credit cards offer zero interest for something you ought to buy anyway, would you say no? Well, debt is unavoidable for mere mortals like us but debt problems, these can be prevented.
Handling Debt
Here are some of the best tips when you have debts to pay.
- Allocate funds for your debts and avoid using those even if your payments are not still due. It’s so tempting to use the money for something else until you realize that you can’t pay within the deadline. This results to fines and without backup funds, ruins your budget. Soon as this becomes a cycle, serious debt problems are sure to ensue.
- Don’t apply for more credit cards or bigger credit limit. Credit card companies reward a good spender with more plastics and higher spending limit. If you already have debts however, it might be good to turn down these offers until you clear your debts. Closing a credit card account may hurt your credit score so use it but no more than you can pay.
- Consolidate debts. When you already acquired a number of debt and having a hard time paying for everything, debt consolidation is a good option. The trick is to make sure that in this new agreement, you will be paying lower interest and/or you will have a more manageable monthly payment.
- Pay more than the minimum. Whenever possible, pay more than the amount required so you can finish your debt early. Most lenders reward early payments and overpayments. Take advantage of this especially when you receive a windfall.
- Consult with a debt management professional or a financial planner. When your debt is growing despite your best efforts, reach out to an expert as early as you can. Finance experts can help you get out of debt by reorganising your finances and dealing with creditors for better arrangements. Soon as you get out debt, your financial planner can even help you come up with a sound financial plan.