Ways to Win Over Debt

Debt is not a tool, despite what you have been told to believe. If you’re reading this, you’re probably under a ton of consumer debt and want to get out. And it’s only right that you should. The more you are in debt, the more opportunities you lose to invest your money and save for the rainy days. It is not unusual to hear of seniors still paying off their student loans. So beware of that $4,000 credit card debt you have from your college years—that can easily balloon into a huge and debilitating financial obligation if you don’t pay it off fast!

Debt should not be given the same care as plants, watering it each day until it grows and blossoms. If you only pay the minimums month after month, it will grow and grow as the years pass by. However, unlike a flower that goes into full bloom when taken care of, debt will only balloon into a monster that will destroy your life. Instead, you should look at debt as a weed that sucks the lifeblood of your plants and hack at it until even the roots are uprooted. Don’t be content to pay the minimums. Rather, treat it like a plague and finish paying all your obligations until you have nothing left. Then and only then can you put your money to better use.

Debt does not give you freedom. In fact, it can imprison you unless you have a very healthy view of it. No, it cannot imprison you literally since we do not have debtor’s prisons here in the United States. However, it can limit your freedoms in a lot of ways. For starters, your financial history is recorded in what you probably know of as your credit report. Your creditors report your transactions to the three credit bureaus—Equifax, Experian, and TransUnion—and form the basis of your credit score.

If you have a bad credit history (and consequently a low credit history) marred by late payments, bankruptcies, and foreclosures, the detrimental effects can spillover to other parts of your life. You could lose your chance of getting a job, won’t be able to get competitive interest rates for loans or won’t even be approved for them, and probably won’t even be able to rent a house. Your credit report is already used as a basis to determine just how financially responsible of a person you are and if it shows otherwise, that can reflect on the rest of your character too. Unfair that maybe, that’s how things work nowadays. So unless you can responsibly manage debt, it’s better to steer clear of it.

But I Already Have Debt!

Unfortunately, majority of Americans are already swimming in debt and for those who are already drowning in it, the lessons above are learned a little too late. But even if you are already in debt, it is still possible to manage it so that it doesn’t push you further into the abyss. To help you do that, here are some guidelines:

1. Pay off your high-interest debt instead of putting your money in savings or investing at a lower interest.Savings is good. However, if you have a credit card loan that earns a high rate of annual interest, you would be better off paying the debt first with your savings money. Here’s the deal: If your credit card debt earns 15 percent interest annually and your savings only gives you a 5 percent return each year, it is logically more practical to pay the debt than stick with meager returns on your savings. You’re essentially losing money if you continue to hold on to your savings instead of using your money to pay off your high-interest debt.

2. Refinance to a lower interest rate.If you have a credit card debt that charges you 15 percent interest rate annually and you can qualify for a low or zero-interest credit card that allows you to transfer your remaining balance to it, then it is wiser to do so. Before you make the transfer, however, be sure to read the fine print as there are bound to be conditions that go with the transfers. For example, the low interest rate is only good for a certain number of months and will revert back to the prevailing interest rates once the time has passed. There are also some cards that strictly specify that the low rates only apply to the balance transferred. When you use the card for new purchases, they are also charged the prevailing market rates.

3. Pay promptly.This is one of the proven ways to build a great credit history. Punctual payments will not only make you avoid additional charges and higher interest, it will also free your mind from the constant worry of not being able to pay your obligations. Now, even if you already have a marred credit history which can’t be undone, it is still possible to rebuild. And the best way to do that is to start making on-time payments. Now if you’re planning to apply for a mortgage sometime in the future, your prompt payments now can mean a huge difference in the interest that you will be given. The more punctual you are, the better your score is going to be, the more competitive the interest rate you will get for your mortgage.

4. Negotiate for a lower rate.You don’t have to contend with a very high interest rate if you can get a lower rate. To be able to get what you want, you’re going to have to ask. Don’t be afraid to pick up the phone and call someone from the bank or the credit card company who has

the power to lower your rates or even just eliminate the additional charges from a past due account. Be sure to get the name of the person you talked to and if your request is granted, make it a point to follow up your request with a letter that encapsulates the conversation and what was agreed upon. This way, you have a paper trail to support your claim. If the first person you talk to cannot or will not agree to your proposal just keep on looking for someone higher up in the chain who will finally be willing to help you out.

Check out www.adamscapgroup.com for more Information on Money Management Tips.

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