We will walk you through the simplified process, from knowing your debt to understanding the tools available, and creating budgets and ultimately, how to avoid debt going forward. If you are ready to keep your financial position, let’s get started.
Key Points
- Before you create a repayment plan, learn about the type of debt you have and what you currently owe.
- Interest rates vary widely by debt type, so prioritize repaying your biggest debt.
- Strategies to resolve your debt include DIY repayments, balance transfers, consolidation loans, home equity loans, and more.
- Reduce your spending while also paying off debts to prevent your balance from growing, and have a plan to keep your budget from getting back to the debt cycle.
Debt Type (and why this matters)
Several types of debt you should know:
- Securing debt Backed by collateral, such as a car loan or home. If you don’t pay off your debt, lenders have the option to grab the assets. It usually has a lower interest rate.
- Unsecured debt There is no collateral and is based largely on the credibility and trust you can and will repay your debt. Most credit cards are unsecured.
- Revolving debt It is open-ended, which means you can use more credit when you repay the balance. An example is credit cards and credit limits.
- Installment debt It is closed. You get a one-time payment from the lender and repay it for a certain period of time, usually with a fixed monthly payment. Personal loans and car loans are common examples.
You must know what you owe before you pay your debt. Write down or make a spreadsheet for every consumer debt you have – We are talking about credit cards, credit cards, personal loans, car loans and student loans. Don’t include secured debts on this list, such as your mortgage.
When you list each debt, note the type of debt/account, owed, interest rates, and minimum payments.
When is there any problem with your debt?
There are many obvious signs that your debt is becoming a problem.
Perform a bowel examination. Are you feeling overwhelmed or stressed by the idea of debt? Maybe you will receive a collected call that will spike in blood pressure whenever the phone rings.
Even if you haven’t reached that point yet, if you only pay the minimum payment and balance continues to grow, or you have to rely on credit to buy essentials and make ends meet, your debt can still be a problem.
You may feel like you don’t have many options, but we’ll show you the tools you need to control your personal finance.
