Managing Debt 101

People get into debt for many reasons. Many students take on loans to obtain the education needed to get a good job. Other people may get into debt making purchases for their home, family or comfort. Unexpected expenses like car and home repairs can add to the debt burden. Because debt is common and sometimes necessary, learning to manage debt is an important step to being in control of your life and finances.

Why should I learn to handle debt?

Mismanaged debt can become a nightmare. Balancing payments and keeping track of due dates can seem overwhelming if you are not in control of your debt. If you miss payments, your interests rate may rise or fees can be accrued, causing your debt to grown rather than shrink. After missing payments, you will begin to get calls from creditors and debt collectors. You may find yourself considering bankruptcy and increasingly anxious about your future. In order to avoid bankruptcy and regain control, you will need to find a way to meet your obligations and pay your debts.

How can I become debt free?

One option that may seem appealing at first is just to ignore the debt and stop paying completely. Unfortunately, your credit rating may suffer and your creditors can pursue you through phone calls and even court action. Before long, you may no longer be able to avoid bankruptcy. A bankruptcy can affect not just your personal finances, but your ability to qualify for a mortgage or lease. In some cases, even your employer check your credit report! A better choice for most people is to create a repayment plan. Paying each creditor monthly will slowly reduce your debt. The downside of this option is that paying a large debt takes a long time and most of your payments go to towards interest. Working with a debt counseling company can help you to get better deals. The debt counseling company will contact your creditors and work out reduced prices so you can pay less and get out of debt faster. After paying off your debts, you will be able to get above water and have extra money available for the things that are important to you. When your debts are managed, you will no longer have to wince when the phone rings. Your mail will no longer bring a pile of "past due" bills and collection notices. As overwhelming as debt can seem, it can be managed and the rewards are well worth it!