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Surviving Debt Management Do-Overs Debt Management and Collecting Your Debts
Most of us who are very good at managing our own personal and business finances are very poor at collecting the monies that are owed to us. We really hate to find ourselves in the position of being a debt collector.
Because we take our own financial obligations seriously, we tend to think that others do the same. They don't...at least not all of them.
Everybody has at one time or another loaned friends 20 bucks and never seen a penny of it repaid yet, and most likely never will. We all know that. We knew when we made the loan that it was really a gift. Those kinds of things you simple chalk up to experience and move on.
Other loans of substantial amounts that are made to family and friends should, however, have legal documents attached to them. Asking for collateral isn't unheard of, and neither is charging interest.
Advice given by very wise people of the past tells us to simply not lend money to family or friends, and it really is excellent advice. You aren't a bank or a lending institution. You are simply very good at managing your own finances.
If lending institutions won't lend your friends and relatives money, it is for a very good reason. The institutions have information that tells them that they aren't very likely to get their money back. You won't have the information about how they have handled debt in the past or how deeply in debt they are at the present. All you are going to know is what they choose to tell you.
The best answer when friends and relatives ask you to loan them a substantial amount of money is, “NO.” But if you do decide to make the loan anyway, at least make it legal and binding with contracts, collateral, and interest.
See Also:
Rumours about debt: be careful who you listen to - Debt Advisers ...
| Planning for Debt Management Debt Management and Interest Rates
It is sometimes just amazing, but people have no idea what interest rate they are paying on loans -- even on their mortgages. Interest rates matter.
Interest on credit card debt is the highest. Credit card interest rates are higher than bank interest rates that you may have for your car loan or the installment loan for furniture or appliances.
Another very amazing thing is that the majority of people do not understand what simple interest is and the difference between simple interest and compound interest. Every high school in America should teach this and the course should be a graduation requirement. Not understanding interest rates costs Americans hundreds of billions of dollars every year.
I do not have the space here to teach a course about interest rates. Remember this: simple interest is less than compound interest. The compounding frequency determines how much higher. Interest that is compounded monthly will be less than interest that is compounded weekly or daily.
Your credit score determines what interest rate you will be offered, and it will also determine just how much interest rate negotiating power that you have. The people with the highest credit scores will always be able to get lower interest rates than people with lower credit scores.
No credit history is viewed in the same way by lenders as a poor credit history, in that the interest rates that are offered will be virtually the same. Build a good credit history and you will get a lower interest rate.
First-time borrowers may have to pay higher interest rates, but it is to their advantage to make their payments on time and in full. If payments can be made prior to the due date, that will raise the credit score. Paying a loan off early will also raise a credit score. |
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| Credit Card Debt Management Debt Problems and Debt Management
Most of the time people will find themselves drowning in a sea of debt and have no idea how they managed to get themselves into so much trouble. It happened much like wading into a real ocean does.
First, you are standing on a nice warm sandy shore enjoying the sunshine and the breeze. You dip a toe into the ocean and it feels really nice. You begin wading out and you are surrounded by things you have always wanted. You just keep getting deeper and deeper until you are in way over your head and you cant see a nice dry (debt-free) shore anywhere in sight.
People very rarely just suddenly get into deep financial and debt problems....it happens one credit card at a time. The first credit card might be an oil company credit card. The next one is usually a store credit card. Then you get the major bank credit cards. It is just so easy to get all of the stuff that you want and need using credit cards and making the minimum payments that are required is just no problem at all.
Before you know it, you are using these credit cards to make your car payments and your mortgage payments, maybe even to buy the weekly supply of groceries. You find yourself drowning in debt. It isnt a fun place to be, for sure.
You can get credit counseling, and you can get a debt consolidation loan or even a second mortgage. But you are really going to get out of debt the very same way you got into debt...one step at a time. The closer you get to the shoreline, the easier it will become to free yourself of overburdening debt. And next time, you won't get too far from shore. |
Related Topics: The Traps of Debt Consolidation for Debt Management,
Debt Management for the Future, Services for Debt Management
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