Introduction
Debt consolidation and refinancing have become thriving
industries in America these days. American personal debt is at
the highest rate we've seen. Creditors are more and more willing
to give out credit cards, or let people easily qualify for home
equity loans so they can refinance or consolidate debt. Not that
refinancing is bad, but often times, we feel that since we've
reduced our interest rates, we can afford "a little bit extra"
credit as a reward.
BusinessWeek says that total household debt in the US was more
than 100% of our disposable annual income last year. The average
person has more than $8000 in credit card debt.
The bottom line is that our personal debt is growing at an
alarming rate. You can now charge your fast food meals at many
restaurants, paying interest for years on something you consumed
in one sitting. Many people have taken steps to address their
debt problems, including consolidating debt to lower interest
rate cards, or to home equity loans, or at worst case the
dreaded "B" word, Bankruptcy.
5 Principles of Debt Management
1. Create an accurate assessment of your debt situation. Make a
list, chart or whatever you're most comfortable with, of all
your debts. Be sure and include the amounts, interest rates, and
expirations dates (especially on any no-interest for ## days
type loans). Be sure and note any old accounts that you've got
"laying around", such as that department store credit account
that you opened to get the 15% discount. You can now get a free
credit report online. You should make sure that you've got a
credit report and FICO score from each of the 3 national credit
bureaus: Experian, Equifax, and TransUnion. The FTC advises
monitoring your CREDIT REPORT activity ON ALL 3 BUREAUS. Order
your 3-bureau report from CreditReporting.com today. If you've
got bad credit, paying down your debts is of utmost importance!!
Click here if you need help understanding your credit score.
Depending how bad your score is, you may also consider
additional measures to repair your credit.
2. Make a budget and stick to it! Making a budget helps keep
from increasing your debt, while you're trying to pay it down.
Be specific and detailed in your budgeting. Except for
emergencies, you should only be spending what is accounted for
in your budget. Some people have found it helpful to keep a 30
day log of their spending. Carry a little notebook, or some
index cards with you, and write down everything you spend each
day. You'll probably be amazed at how much money you spend on
things you want, and don't
really need. The smallest things,
such as that $3 cup of coffee every day, can slowly eat away at
your finances. This will help keep you from getting further in
debt. Your budget should define how much money you'll send to
each of your creditors monthly and how much you need for bills,
and how much is left for discretionary spending. Try limiting
your discretionary spending to things you can buy with "pocket
cash". This may be hardest thing you've ever done, but you won't
get further in debt if you only spend what you have.
3. Pay off the debts one by one. Maintain minimum payments to
the rest of the debts, but pick the debt with the highest
interest rate, and send extra payments to pay it off. There is a
proven psycological benefit to being able to take a debt off of
your list.
4. Consider debt consolidation or debt restructuring and
possibly refinancing your home mortage. Lower your credit card
debt by 70% by consolidating. With interest rates down, it also
may be time to refinance your home mortgage loan and cut your
monthly payment. You can get free mortgage loan quotes at
LowCostLending. When you refinance, make sure closing costs and
other fees don't outweigh the savings in your monthly payment.
Another option is to get a Home Equity Loan. Home equity loans
are good because they allow you to deduct the interest on your
income taxes. Remember though, new credit is not a license to
incur new or more debts. Once you've transferred a balance by
consolidating, or refinancing, don't add more charges to the old
account. If you've got a lot of open accounts, you may want to
close some of them, but you shouldn't necessarily always cancel
the old account. Having a good payment history with a few
existing accounts can be better for your credit record than many
cancelled and new accounts.
5. If necessary, get help. You may choose a credit counseling
service, or debt counseling and debt help service to help with
each step of your debt solution. Credit counselors can add
accountability to your debt solution, and also serve as a source
of encouragement. They are used to dealing with people with bad
credit or poor credit, and can help you create a custom debt
solution. They can suggest money lenders that might be more
willing to make a loan to someone with a lower credit rating.
Once you start reducing your debts without incurring new ones,
you'll start to see your credit score rise.
For further information, go to http://debt.getfreetoday.net< /a>
About the author:
Written by Tom Sexton.
Webmaster of http://www.BestCareerLinks.com
Written By: Tom Sexton
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