Bankruptcy & Foreclosures

If you have a lot of debt, deciding where to put your money can be a difficult decision. This is especially true if you have debt which is spread out across many loans. That being said, you should come up with a plan for paying off your debt in the best possible manner. Believe it or not, there is a method that you can use to better your situation and in turn pay down your debt as quickly as possible.

First things first, you need to realize that some debt is better than others. For instance, although your mortgage and car loan is debt, you should not look at this in the same way as credit cards, department store cards, etc. In most cases, you will want to pay down your “bad debt” first.

What if I have several credit cards that need to be paid off? As a general rule of thumb, begin by paying extra on the one with the highest interest rate. Obviously, you will save yourself a lot of money in the long run by paying off a credit card with a 25 percent interest before one with a rate of 10 percent. This is nothing more than a numbers game in which you need to have precise knowledge of your debt, the corresponding interest rate, and how you are going to pay it back.

The bottom line is that you should pay off bad debt first. To take this a step further, start with the debt that has the highest interest rate. If you follow this path, you will be on your way to paying down your debt in the quickest and most effective way.

Is living a debt free life a realistic goal? Many people believe that this is simply impossible. Although you may be able to cut all debt out of your life, it will be very difficult. After all, most people want or need to make purchases that will require a loan. These purchases can include anything from a home to a car.

That being said, you should keep in mind that there is good debt and there is bad debt. If you have good debt you may not find yourself in financial distress. But if your bad debt is growing, this is when you will begin to experience problems that could cause major issues soon enough.

Generally speaking, a mortgage is good debt. The reason for this is simple: most homes appreciate in value. So even though you are going into debt to purchase a home, over the long haul you will earn money.

Although a car is a depreciating asset, it is often times debt that you need to incur. After all, if you are going to live a comfortable and convenient life you will probably need a car. While some people can afford to pay in cash, this is not the case for the majority of buyers. Although car loan debt may not be considered good, through and through, it is not as harmful as other kinds.

What is bad debt? The most common answer to this question is credit card debt. This is debt that you do not need to have, and of course, debt that is often times attached to a very large interest rate. Credit card debt is the downfall of many budgets. This has been the case for many years, and probably always will be. Anytime that you hear the phrase bad debt you should think of credit cards.

It may not be realistic to live free of all debt, but you should at least try to keep bad debt out of your life. 

More college students than ever before are applying for at least one credit card. There are several reasons for this. First off, credit card companies are marketing to this group because they know that they can garner a lot of business. To go along with this, credit card companies are also well aware that these students will eventually graduate, secure a job, and in turn use their credit even more. Secondly, college students who are strapped for cash have found it easier to get by with the help of a credit card.

Of course, there are pros and cons of a college student having access to a credit card.

On the beneficial side of things, this is a great tool for buying school related expenses. For instance, you can put books, school supplies, and other expenses on a credit card in order to make the buying process less stressful and more manageable.

Another benefit of a credit card is that it is great for emergencies. Are you worried about your child’s car breaking down and them not having a way to get it fixed? If so, a credit card that is to be used for emergencies only is a great idea.

On the downside, you can get into a lot of financial trouble with a credit card. Once you receive your card and are aware of your limit, it pretty much means that you can go on a shopping spree. Should you do this? Of course not. But many college students, especially those who do not have other money, tend to splurge when they have access to a line of credit. When this money is not paid off in full, interest charges will begin to accrue. And in most cases, credit cards for college students carry a high interest rate.

There are pros and cons of college students having access to a credit card. If you are thinking about this for yourself or a child, make sure that you consider both the benefits and drawbacks.