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Debt Management and Interest Rates Debt Management and Consumer Counseling
It isn't very hard to get into financial difficulties. Getting out is a lot harder. It might be a bit painful, but it can be done.
And once you have breathed out-of-debt air, you will never again want to find yourself in deep debt waters again.
Most people do not view credit cards as loans, but that is precisely what they are -- loans. When you hand a credit card to a cashier, you have in effect borrowed the money to pay for your purchase.
The same is true when you enter your credit card information on websites to buy merchandise. It's true that credit cards are a convenience. They make buying things much easier and so much quicker, but they are loans.
When you engage the services of a consumer credit counseling service, you will be asked to supply a list of your debts. You will find that some debts can be renegotiated -- even some secured debts can be renegotiated, including mortgages. You will also find out that your unsecured debt (credit cards) can be renegotiated. But there is a catch there.
A credit counselor is usually in a position to stop the interest and late charges from continuing to mount on your credit card bills. Interest rates can be decreased and late charges can be eliminated altogether. The catch is that the accounts will be closed...permanently. You cannot continue to use those credit cards, and you cannot apply for another credit card until your debts have been paid off in full.
Your total monthly obligations can be reduced by quite a bit and you will be able to live within the budget that will be created for you. It sounds really painful, doesn't it? The truth! You are going to have to make some major adjustments, but that isn't necessarily a bad thing.
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Debt Consolidation & Management
| Is Debt Consolidation Your Debt Management Answer 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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| Easy Credit and Debt Management Debt Management: Getting the Priorities Straight
Using half your paycheck to buy lottery tickets in hopes of winning millions instantly is not a satisfactory debt management plan. Successful debt management is based upon truth, reality, and keeping your priorities straight.
The necessities of life must come first when you make your debt management plan. You need food, shelter, utilities, transportation, and clothing....and pretty much in that order. After the total cost of these necessities is subtracted from your bring home pay, what's left is your disposable income.
How much you spend on each of these necessities will determine the total cost of your necessities. When you cut the cost of any of the necessities, you will have more disposable income and when you add to the cost of the necessities, you will have less disposable income.
My daddy summed it up pretty well for me. He said, “The less you spend on what you have to have, the more you will have to spend on what you want to have.”
You have to make your own choices, of course, but here are just a few ideas that might help:
1. Food: It costs less to eat at home than it does to eat out.
2. Shelter: Less space costs less money....usually.
3. Utilities: Raise the thermostat by two degrees in the summer and lower it by two degrees in the winter. Turn off lights when you leave a room. Don't leave water running.
4. Transportation: A five-year-old car will take you to the same places that a new car will take you.
5. Clothing: Clothes purchased at discount stores costs less than clothing purchased at upscale clothiers.
Debt management is all about getting your priorities straight and making choices. Priorities are nonnegotiable, but how much you spend on them is negotiable. |
Related Topics: Debt Management and Interest Rates,
Free Programs for Debt Management, Singing the Debt Management Blues
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