As many of us know, it is all too easy to fall into the trap of overspending and becoming ‘charge happy’ with the credit card. You’re not alone – according to CreditCards.com, the average American household with at least one credit card has amassed close to $15,950 in credit card debt in 2012.
If you are one of those consumers with a ‘buy now, pay later’ mentality, it might be the right time to adjust your attitude on debt. Read our guide to learn how to effectively control debt so that it is manageable and helps you to achieve a better fiscal standing in the long term.
Lesson 1: Some debts are good debts
It is unavoidable to set out to avoid getting into any kind of debt whatsoever. Sometimes, you need a quick, emergency personal loan from one of the lenders in the personalloanforbadcredit.org to help you get on the right track; other times, the debt might be something longer term like a mortgage for your home or a loan for college. These are necessary debts that are for positive reasons. The trick is to never borrow more than you can afford to pay back and to always shop around for the best rates available.
Lesson 2: Live by ‘The 36% Rule’
Experts calculate that your total monthly long-term debt payments, including your mortgage and credit cards, should not exceed 36% of your gross monthly income. This metric is utilized by mortgage bankers consider when assessing the creditworthiness of a potential borrower, so it is a tried-and-trusted method that really helps to control debt.
Lesson 3: Minimize your use of credit cards
Credit cards are the number one way to fall into ‘bad’ debt. As we have seen, credit card debt is a spiraling problem in the U.S. When consumers get into the habit of using their credit cards for every day, non-essential purchases, the level of debt mounts and grows into something with a life of its own. Credit cards, short term loans and other “quick and easy” finance options should not be used for things that you consume quickly, such as dinners, lunches and paying for vacations.
Credit cards are the number one way to fall into debt. Rather than relying on the plastic, put aside a little extra cash every month for those luxury items so that you can repay your bill in full each month. If you want to splash out on a big purchase, save more cash for a few weeks or months before putting it on the card so that you are able to repay it in full and dodge expensive interest charges.
Lesson 4: Vow to pay off your higher-rate debts as a first priority
The golden rule of effectively controlling debt is paying down the balance of loans and credit cards with the highest levels of interest first, then the next highest after the first is cleared. Be disciplined and persistent and you will establish a good pattern of debt clearing and repaying that will see your financial situation improve sooner than you think!
Lesson 5: Accept help when you need it
If you need an interim personal loan to help balance your outgoings when things are tough, it is perfectly acceptable to borrow a small, affordable amount to get you into a better fiscal state. personalloanforbadcredit.org can put you in touch with top lenders offering bridge loans at competitive rates.