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
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
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
- 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
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
- 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
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
Reducing Debt and Steps Toward Effective