Millions of adults are struggling as they try to keep up with their debt and interest payments. The problem is that many of these people incurred various debts, such as their home mortgage and credit cards, without fully understanding the terms associated with the loan, or unexpected circumstances arose. It is not until the bills start coming in, that they fully understand the repercussions of this debt. Below are ten practical debt tips to help you avoid getting in over your head.
- Think Before You Spend
Credit cards allow you to purchase almost anything you want, and can lead to excessive impulse spending. You may find yourself purchasing not only things you do not need, but things you cannot afford. To avoid this problem, leave your credit card at home and give yourself some time to think before making the purchase.
- Read the Terms and Conditions
Any time you enter into a new loan agreement or obtain a credit card, be sure to read all of the fine print found in the terms and conditions. If you find anything in these terms that you do not understand or do not agree with, contact your lender immediately. Remember you always have a cooling off period to change your mind.
- Never Pay Only the Minimum Payment
If you have a credit card, do not fall into the trap of only making the minimum payment each month. This will force you to pay more in interest and take you longer to pay off the debt. This often causes the never-ending cycle of debt. Instead, pay as much as you are able to each month.
- Set and Maintain a Household Budget
If you do not already have a household budget, now is the time to start one. This will help you track your spending habits and hold you accountable to only spending the money you have available in each category of your budget. In turn, you will have more money to pay off your debt.
- Keep Track of Changes in the Terms
Credit cards are famous for changing the terms of your loan with little notice. Be sure you look over your bill every month and check to make sure your credit limit and interest rate has remained the same. Feel free to contact your credit card company and ask them to explain any changes you found.
- Reduce Number of Credit Cards
If you currently have more than one credit card, you have too many. To get control of your debt, it is a good idea to limit your credit cards to just one. Select the one with the lowest interest rate and then contact that credit card company and ask them to set a reasonable credit limit that you can stick with.
- Beware of No-Interest Loans
No-interest loans sound like the perfect solutions to purchasing the items you need, such as electronics and furniture, and pay later. Since they charge no interest, it seems like a no-risk loan. The problem is that if you do not repay the loan with in the no-interest timeframe, you will be charged interest and typically at a very high interest rate.
- Set Up an Emergency Fund
If you do not already have an emergency savings fund, you should start setting back a little bit of money with each pay cheque to start one. These extra funds can then be used if you have a financial emergency. This can replace the need to use a credit card, and instead of paying interest, you can start receiving interest.
- Talk to Lenders when Having Trouble Paying Bills
If you are struggling financially and having trouble keeping up with all of your bills, it is important that you are proactive. Contact your lenders right away and explain your situation. Most companies have a hardship office that will be willing to work with you. This can avoid costly late fees and a bad score on your credit report.
- Seek Financial Advice
It is always recommended that you see advice from a financial counsellor before entering into a new loan agreement. The counsellor can review the details of your loan and explain all the terms and conditions to you. He/she may also be able to help you find viable alternative to taking out a loan.
These practical debt tips can prevent you from falling into the never-ending debt cycle. The most important thing is that you take control of your finances and educate yourself about debt financing and alternatives. Also, never be afraid to seek out help if you start struggling, there are many great resources that can help you get out and stay out of debt permanently.