Debt Management

Reducing Debt and Steps Toward Effective Debt Management...

What is Debt?

Most of us have some debt. Debt is when you owe money to a lender or creditor. You go into debt because you want to have or use something now and pay for it later. In return, you pay the lender or creditor extra money called interest.

Debt isn't a problem if your debt falls within your ability to repay it, but unfortunately many of us have financial pressures, needs, or life circumstances that cause us to go deeper into debt than is appropriate... that's when things can quickly get out of control.

The Importance of Managing Debt before it gets out of hand

When a debt is not repayed on time, you often end up paying much more for it that you otherwise would have if it had been paid within the agreed upon term. Late fees, interest and other finance charges can add up quickly adding to your total debt and increasing the probability that your debt load will surpass your ability to repay.

Late payments also hurts your credit rating. In turn, credit may be harder to get in the future, or it may cost more to get it. This adds to the problem by limiting your choices for what is called debt consolidation.

If you miss a payment to repay your debt, you could lose your line of credit or end up with the goods you went into debt to purchase being repossessed. For example, if you miss your car payment too many times, the creditor has the right to demand payment of your entire loan, and then if you can't, take your car.

Financial problems can also force you to file for bankruptcy, which seriously damages your credit rating for a long time.

Know when you're in Debt Trouble!

How much debt is too much depends on how much money you make (income) and how much money it costs you to live (expenses). Experts say that you should spend no more than 20% of your take-home pay (after taxes) to repay debts to creditors, excluding your house payment.

For example, if your paychecks add up to $1000 per month, you should spend no more than $200 per month to pay off loans, car payments, credit card bills, etc.

But you may decide that less debt than that is too much. If you're unable to do the things you want because you're still paying off old bills or can't meet your basic living expenses, it may be time for you to develop a plan to reduce your debts.

Start Reducing your Debt Load Today....

• Do you have so much debt that you have to borrow to pay current bills?
• Do you regularly pay your bills late?
• Do you need to use credit to buy things like groceries?
• Are you being contacted by bill collectors?

If this sounds familiar, you should probably get help from a credit counseling service.

If you owe hundreds or thousands of dollars to more than one company, you can get free help. Consumer Credit Counseling Service agencies are non-profits that work with you and your creditors to lower payments to a level that you can afford. In many cases, all of your bills can be paid with one monthly payment.

Steps towards effective Debt Management

• Stop spending money you don’t have... If you keep spending, you’ll dig yourself into a deeper hole.
• Think about your budget... If you don’t have one, now’s the time to make one.
• You don’t have to do it by yourself... If you’re behind in your payments and can’t pay your current bills, call a credit counseling agency right away. They’ll contact your creditors, explain your situation, and work out new arrangements.
• If you can’t pay the balance in full make the minimum payments, on time... Work with a credit counseling agency if you need help.
• Get help repaying your debt... Non-profit credit counseling agencies can really help you get back on track.
• Don’t use agencies that charge for their services and spend a lot of money on advertising. They usually charge very high fees.

Consumer Credit Counseling Service (CCCS) can help you contact your creditors and make a plan to get out of debt. CCCS has branches all over the country so you can get help in your area. CCCS programs are part of the National Foundation for Credit Counseling.

Provided as a public service by My Cash Advance.net

Debt Management

Reducing Debt and Steps Toward Effective Debt Management