Debt: 5 basic strategies to get out of debt
Being in debt is the reality of today’s financial system but you can be in a GOOD debt or in a BAD debt. What is the difference.
- Builds your credit
- Helps you to invest more
- You control it
- You have assets or resources to pay it off
- Allows you to use financial systems benefits such as buying products you can not really afford.
- You don’t control it
- It controls you
- It makes you lose your credibility and makes you paying more for products and services
- It does not allow you to access financial system benefits
So, how do you get out of the BAD debt in case you have been trapped
- Identify BAD debts. Write down all you debt (formal or informal), write how much each debt costs you per month, per year, check for which debt you have cover in asset and which is not covered. Make sure you understand what is the length of each of your liability.
- Once you have this list with all the details written for each of your loans, credit cards, mortgages or any other kind of debt identify the most expensive debts per month. Usually credit cards are the worst and most expensive as they keep increasing monthly or daily in some cases..
- Make sure that you don’t lose your assets in an uncontrolled way such as repossession. If you can not afford the property, it is better to sell it than to lose it ass you will get much more money for it.
- Find the financial product that will allow you to consolidate the debt for a very low cost: such as one low interest rate loan, long term credit card with 0% for purchases and transfer. If you can not afford it as your current job does not helps you, change the job as soon as possible.
- Have a plan. Once you understand your debt and found the product to consolidate your debt make sure that you can afford it and have the plan to pay it off. It is nothing worse to take another loan and star being behind again. If you compare your credit card intesrest of around 30% and loans interest of 4-7% you will be better off but you must pay it back. If you can not do it, take another credit card with 0% interest on Purchases and put all spending on it making sure you pay the minimum on the monthly basis. As long as you control it you can take another loan to move the outstanding balance from this credit card in the future. You will still be in a BAD debt but you will limit the damage. You plan must clearly show reduction of dept and its cost every single month. If it does not do it again.
- Temporarily increase control of your spending. You will have to put on hold some of your dreams such as: holidays, new car, new video game and stick to essentials for a year or two until you come out o the deadly debt trap
- Follow the plan. Once you have the plan, review it monthly and make sure you don’t deviate from it.
- Turn your BAD Debt into the GOOD debt.As long sas you pay off the loans and minimums on your credit cards you are starting to build your better credit score. This will allow you to have access to better financial products such as lower interest rates loans, credit cards or higher credit lines. Do not apply for it too early. Every time you get rejection it adds this to your credit score lowering it again. allow one year for building the credit score and try one or two good products which you really need. Once you are approve start using more products. This will make your debt cheaper and quicker to pay off.
Once you do it enjoy the benefits of the financial system
This is just my humble opinion and it may work or not work for you. You have to be vare careful what you are doing about your debt and it is your responsibility to do the appropriate research and get all the advice you need. This post is just my opinion not the advice so please use it as the opinion. nd I am open to your comments.