Interest Rates and Eliminating Debt
Getting into debt is easy. Once you get in debt, eliminating it from your life is a difficult and often grueling process.
An unexpected and/or unfortunate event, uncontrolled spending, and not paying attention to bills and other financial obligations are the main reasons why most people get into debt in the first place.
Another common reason for bad debt involve circumstances such as sickness, which leads to medical bills (this also takes into account the lack of affordable medical insurance for many people) and the loss of a job.
While you may have gotten into debt through circumstances beyond your control, you are still responsible for getting yourself out of it.
Before you pull out your credit card to buy that new dress and that new pair of shoes for your date on Saturday night, stop and think about what you are doing.
High interest rates on credit cards makes it harder to pay them off and, in the long term, do more damage to your credit than you might realize, especially if all you pay is the minimum payment every month.
If you use your credit card responsibly and pay it off in full every month, you will not incur the high interest rate charges. However if this is not something that you are able to do, then think twice about using your credit card for fun or for frivolous purchases.
Shop with cash. If you shop with cash, you are less likely to buy items you cannot afford, as the lure of credit card spending will not overshadow your shopping trip.
In order to eliminate debt that you do not need, always stay abreast of the facts involving your purchases and get as acquainted as possible with your debts.
Make sure you are aware of the balances on all of your credit cards and outstanding loans and become as knowledgeable as possible about interest rates and how they affect your payments.
Find out what whether the interest on your credit cards and/or loans is deductible and also find out when, as well as how much, the rates are subject to change.
Always take stock of your bills and prioritize then. The items that are non-deductible include credit cards, personal loans, and car loans, while deductible items include mortgages and home equity loans.
Some student loans may be deductible, but not others. So if you have student loans, do some research and find out whether they are deductible or not.
Take your bills and prioritize them into categories of importance. Then pay them in the order that make the most sense.
As a rule of thumb, pay off the debts that have the highest interest rates first because those are the ones that will cost you the most in the long run.
If possible, pay more than the just the minimum payment on your credit cards and other loans because, with the compound interest that card companies charge, the minimum payment does no more than keep the card companies from harassing you about the payment and the debt will take much longer to be eliminated.
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