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Getting Out of Debt

If someone is in debt to the point where it has become a burden, they already know they would like to get out of debt, you don’t have to convince them. In particular, I am referring to credit card debt not so much a mortgage. When debt begins to erode away at your financial health it becomes a disease, where it consumes more than it was ever intended to do. It is not good for your overall health either, debt can contribute to worry, stress etc. Some people even have trouble sleeping when they are being consumed with it and can’t seem to find a way out. What they may not know however what they should actually do in order to do so. But there are ways and methods to help reduce it and live within your means.

The reason why a mortgage is not as much as a stress as credit cards is because with a mortgage, one is typically investing their payments. Someday they will hopefully have paid off their house and then they will have something that is worth a lot. Credit card payments however are not the same, perhaps you have spent money on clothes, eating out, electronics etc, things typically not associated with an investment. Often after a short while many of these consumer products purchased are only worth dimes on the dollar in what someone could actually sell them for. A house however tends to keep its value and actually goes up. I say this is generally the rule because we all know that it is not always the case. Credit card debt however is really the dagger you need to look out for.

The reason credit card debt can be so damaging is because of the interest charged on overdue payments. If you pay off your credit card bills each month, than you don’t have to worry about any kind of interest charges. Where the trouble begins is making partial payments or worst of all, the minimum payment. Lets for example the interest rate is 15% (this amount can vary and also be warned that cash advances usually carry a higher rate). With this 15% lets assume you owe $8000 and you make only $200 a month payment on that amount. Assuming you do not accumulate any further debt, it will take over 4 years and you will have paid over $3000 in just interest charges. Bump that rate upto 18% interest and you will take over 5 years to pay it off and have paid over $4000 in just interest. Also studies have shown that people typically will spend more if they are using credit cards over cash or a cash equivalent. It probably has something to do with paying for it later and not actually seeing the money. But knowing this can help you to spend less if you are needing to do this.

If you are spending out of control and are stuck in a whirlpool of debt, you may want to see a financial counselor. They can help you implement a budget that you should be able to stick to as well, they could provide some debt consolidation or debt settlement options to further assist you. The services that exist out there range in fees and what they deliver. There are also non profit businesses to help you but non profit still may have fees associated with them. They are just not actually making a profit from it.