If you find that your debt is out of control, it's always good to get back to the basics.
DEBT CONTROL BASICS:
A) DON'T BE A VICTUM OF "EASY CREDIT TERMS"!
We have all been at the check out stand and the sales person asks if we would like to get an instant 20% off the purchase. All we have to do is just take a few minutes to fill out an application for their store card.
Sounds like a good deal, right? WRONG
Most of the time, store cards are not a good idea. Let's say that your bill is $100 and with the 20% off it is only $80. Nice savings. I bet you are starting to feel like an Extreme Couponer!
However, if you don't pay the remaining $80 off within 30 days and just pay the minumum payments, you could end up paying 2-3 times as much to finally pay off that card. Not only that, but store cards often come with high interest rates. Frugal shopper beware!
B) DON'T BUY SOMETHING IF YOU CAN'T AFFORD IT!
I know this sounds simple, but most people get in trouble with their credit as result of spending way beyond their means!
Here's what happens:
You already have a couple of credit cards charged up to about 70%-80% of the credit limit, and you are making the minimum payments each month without too much effort.
You "really need or want" that item and tell yourself something like "It would only increase my monthly payment by $20 and I can handle that."
WARNING! WARNING! WARNING!
- Your credit limits will start to be maxed out and that will result in a higher CREDIT RATIO. Your credit score will decline.
- By the time you repay these cards making minimum payments, you could end up repaying 2-3 times as much as the current balances!
- If you should have a severe financial setback, such as Unemployment, Divorce or Major Illness, you could be in real trouble.
C) CONSIDER A DEBT MANAGEMENT OR DEBT SETTLEMENT PROGRAM.
DEBT MANAGEMENT is a program designed to:
- Combine all of your payments into ONE PAYMENT.
- Reduce the interest rates and fees.
- Help you pay off all of your cards in about 48 months
But, if you do not quality for a DMP, you should consider a DEBT SETTLEMENT PLAN:
- One monthly payment much less than all of your current minimum payments
- May reduce your balances by 50% or more
- Avoid bankruptcy
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