Want to be DEBT FREE? Debt Consolidation may be the key!

Think of Debt Management as a way of Living

Almost everyone has debts. The question is how they live with them? Is it heavy burden causing stress and anxiety? Or is it managed wisely, helping you to succeed financially. Which debts should you agree to take on and which should you refuse.

Some Debt is good

Borrowing money to finance a college education usually makes good sense. That's because the initial investment provides future opportunities for growth. College educated people tend to make more money than high school graduates. Taking a mortgage to buy a home usually is a wise investment. Historically, real estate prices have risen, so hopefully when you sell, you'll make a profit.

Some debt is bad

How do most people get into debt trouble? Is it because their vacations were too expensive, or because they have expensive taste in clothing and accessories? Many people get into debt trouble simply because they want something more expensive than they can afford. This is how people get caught up with expensive interest charges on overdrafts and loans.

All debt isn't equal

Loans with higher interest rates should be paid off before loans with lower interest rates. Have an overdraft at the bank, and at the same time, a healthy savings account? It may be wise to cash out on the savings and eliminate your loan and growing interest payments. If you have equity in your home, maybe it's time for you to use part of it for debt consolidation. This is what is called debt management.

So is a Debt Consolidation Loan good or bad?

Interest rates for debt consolidation loans taken against home equity are very low. In addition, you can periodically renegotiate interest rates in response to market conditions. You can save a lot of money simply by paying off your outstanding high interest debts with this loan. However, when signing, make sure monthly payments don't take your last penny.

Debts take on a life of their own

Overall debt, including credit card debt, car loans, debt consolidation loans, and school loans shouldn't exceed 30-40% of your gross income. Other financial institutions are stricter and recommend debt doesn't exceed 30% of take home pay. Due to gaps between net and gross income, total debt shouldn't exceed either guideline.

Often debt crawls up on a family

People tend to underestimate expenses by around 20%. Keep detailed records of expenses and collect receipts. You should then get an accurate picture of how much it costs you to live. Consider seeking consumer credit counseling for help. It's easy to spend more than you should because banks love lending money.

Don't go into debt to buy gifts

Buying gifts is a common way to show people that you care. While expensive gifts may be fun to receive think about the ramifications before giving them. Instead of forking up 200$ a month to pay for a loan on a new watch, put the same amount of money into savings. Then, when you've accumulated the necessary amount, purchase the gift. This way you avoid the potential stress of missing a payment.