The credit card is an important part of American life, and so is the consequent debt trouble. Credit card debt means the entire outstanding balance due on the credit card. Late payments impact your credit rating, and result in penalties and more payments towards interest than principal. You are not prompt in fulfilling the payment obligations and if you’ve got more than one card, the difficulties compound, causing a financial mess.
Many people instantly resort to debt management services and consolidation loans when the debts get unmanageable. But these services entail new expense which will raise your payment obligations. Additionally, despite the rosy picture they paint, these services have many hidden clauses which are not easy to decipher. Debt management strategies, especially, may not be appropriate for individuals with quite serious debt issues – in which case filing for bankruptcy might be the lone way to begin afresh.
Pros consider that one should consult a certified credit counselor before taking up any debt repair measure. Many non-profit organizations like credit unions, US Cooperative Extension Service, universities and consumer protection bureaus offer free counseling. The counselor will review your financial situation, estimate how long it might take to clear the debts, give customized advice about whether you need professional debt management and help pick a reputable service.
In fact, there isn’t any need to run to paid services if you find yourself neck deep in debt. You’ll be able to chalk out your own debt management plan with the guidance of the counsel. First thing to do will be to cancel all the cards except the one with the lowest interest rate, and then it should be used only for emergencies. While handling the repayments, pay the debts with greatest rate of interest. Paying more in relation to the minimum is the key to extinguish debts substantially quicker. If you pay only the minimum, you might be paying only the interest and it will take years to clear the whole debt.
Many credit specialists believe that prevention is preferable to cure, and the finest way to deal with debt would be to avoid going overboard with credit cards. First step is to prepare a budget and to spend within that budget. Folks who cannot resist temptation should leave the cards at house. By limiting oneself to one or two cards, it’s easy to keep track of payment obligations and purchases. You should try to not utilize the accessible credit entirely. Remember, it is never too late to start executing these preventive measures.