What is Debt?
A debt is money owed by one party to another. Not everyone has the same types of debt but for the most part debt is tied to credit cards and various types of loans. Debt can be a useful financial tool or complicate your financial life and force you to make drastic moves to get out of it.
Learning how to handle your debt can be tricky, especially if you’re already behind on payments or already have collections calls ringing your phone every day. There are different ways to approach each type of debt and several services that offer debt relief. In some cases it may be wise to consolidate debt, settle debt or even file for bankruptcy.
Your Guide to Managing Debt
A fundamental component that determines your financial success is how you manage debt and the debt you take on. The goal is to keep your debt to a manageable amount in comparison to your income. The different types of debts should take up a portion of that income. For example, it’s recommended that your mortgage payment does not exceed 20% of your monthly income. Do you need help managing your debt? A debt management plan may be the right next step for you.
Types of Debt
The term “debt” has a very negative tone to it and is often looked at as bad. It’s not bad to have debt. There are four types of debt: Secured, Unsecured, Revolving and Non-Revolving. Every debt you take on whether it’s a mortgage, student loans or medical bills will fall under these categories. Do you know the types of debt you have and how they can impact your financial success?
Getting Out of Debt
In today’s world it is much easier to get in debt than get out of. It is easier now more than ever to get a credit card or a personal loan as banks and creditors continue to lower their requirements to attract users. As much as you need to know what you’re getting into with this new debt you need to make sure you have a plan to get out of it. Your debt should be factored into your budget and you should be consistent with payments and stay proactive. We cover the proactive ways to stay out of debt with modern debt clearing strategies.