Debt isn’t always a bad thing – mortgages and education are long-term investments. Rethink what it means to have debts and how to properly utilize loans, pay off credit card debt and keep your finances healthy.
Buying Or Refinancing Your Home
Buying your first home can come with a lot of stress, but this type of debt is a huge milestone for many. It can be a step toward bettering your credit or a big test of your score. There are hundreds of options to refinance a not so good mortgage and even more to help you choose the right loan type.
Going To College
Student loans can be useful if you know what you plan to do and your education goes smoothly. Always be sure that college is right for you before opting to take on big loans.
With your diploma in hand, you can refinance student loans so your repayment is smoother and less stressful!
Credit Card Debt
This is one of the most common types of debt in the United States, and the hardest to recover from. With high interest rates working against you, keeping up with payments can sometimes be a struggle.
Use debt repayment strategies like the snowball, where you tackle the lowest balance first and eventually your debts are paid off. Or the avalanche method where you choose the biggest balance with the highest interest rate and watch the debt disappear!
Debt consolidation is great for anyone looking to consolidate all of their debts – be they credit cards, car loans, mortgages, utilities, rent, student loans, etc – into a single account that requires a single payment.
A lender essentially buys your outstanding debt(s) and applies a single interest rate for all of them, along with a deadline when you’ll be expected to have paid off all the debt.
Consolidating debt has other side-effects, as it can hurt your credit. 15% of your credit score is measured by how much time you’ve had credit for. So if you have ten credit cards with debt on them, and abruptly you consolidate them into one single, then that kills ten lines of credit.
This essentially wipes away all of those years you’ve had those credit cards. For some, this is a dealbreaker.
Believe it or not, there are people who will help you out of debt.
Organizations like the National Foundation for Credit Counseling (NFCC) do not work for profit. These organizations are often funded via charity, and exist to help people escape from the clutches of debt.
They still have fees, however, so research their fee structure and verify that they’re actually nonprofit.
Once you find the right firm, they’ll actually reach out to your creditors and lenders to negotiate better terms for your outstanding debts. The results will be your new monthly payment, which will be owed to them.
The next step is to then work on controlling your spending, for some this means cutting up credit cards and going cold turkey.