The Three Things You Need To Know To Stay Out Of Debt
Debt is a significant problem in millions of peoples’ lives. However, it is relatively easy to stay out of this predicament. In fact, all you need to know about are the three things below. Read on to find out more.
1. How money works
Now, don’t balk at this! You do need to know how your finances work to keep yourself out of debt, and unfortunately, too few people realize they don’t have this understanding until it’s too late.
That is why you need to investigate things like how budgets, credit, and banking works.
Luckily, budgeting is a pretty simple task when you get down to it. You just have to ensure that there is more money coming in then there’s going out. To do this, it is essential to track your spending, something that you can do by using a simple spreadsheet or app on your phone.
Credit cards are a bit more complicated. They let you buy things you haven’t got the money now for and then charge you an additional percentage for the privilege, on top of the actual cost of the item. That means you have to pay back a specific amount each month, and if you don’t, you risk harming your credit score and damaging your finances in the long term.
Banks are more complicated still, especially if you consider all the products they offer such as personal, premium and business accounts, as well as mortgages, and loans. However, to help, you can check out sites like Market Review for more information on this issue. Otherwise, how will you know when you are in danger of incurring charges that you don’t want or can’t afford to pay? Remember folks financial know how is the first pillar of debt prevention.
2. Why catalogs and payday loans are a bad idea
Something that everyone that is trying to keep out of debt needs to know about is ways of borrowing like catalogues and payday loans. The reasons for this is that these are the sort of agreements that charges vast interest rates when you borrow from them. ,
In the case of catalog shopping, you can end up pay anything from 20-40% interest rate. This rate makes it incredibly hard to pay off the full cost of the item, as so much money is added on to the bill you owe each month. What happens is that you pay off the minimum, but you never get close to completing the payment for the item itself. Something that ensures that they get to charge you just as much next month, and the month after that until you can clear the debt in total.
Regarding payday loans, an interest rate of 40% would seem generous! Instead, such loans can incur charges of over 1000%! OK, so they aren’t meant to be paid off over the long term and are designed as a quick fix when you are in money trouble. However this is still an extortionate amount, and it’s safe to say that anyone taking one out must have to be pretty desperate or unaware of the massive charges involved that could lead to debt.
3. What your options are if you are in debt now?
This is perhaps the most important thing you need know if you are going to keep yourself out of debt in the long run. After all, if you are in debt, now your priority will be paying this off and getting your account back in the black as soon as possible.
Luckily, depending on the type of debt you’re in there are several things you can do. For example, if you have a credit card and catalogue debts, consolidation may be the best option. Consolidation is where you sell your debts to a company that pays them off; then they charge you one monthly fee that is more affordable. The benefit of doing it this way is that you don’t end up getting into trouble with late fees and missed payments. Both things that can damage your credit score and even mean the bailiffs come to pay you a visit.
Ironically, you can also use credit cards to help get you out of debt. To do this, you need to find a card to sign up for that has 0% interest on both purchase and balance transfers. This only means that you won’t be charged any interest anything you buy on that card, as well as any balance from previous cards you transfer over for the allotted time. This is something that you can use to get you out of the cycle of paying off credit debt, or for a big ticket purchase items that you then pay them back over time without having to take a loan out and get into more debt.