Debt & Debt Management | Credit Report Repair

Credit Repair Services and Information

About Debt

About Debt
Good Debt vs. Bad Debt
Debt Management

Learn more about debt consolidation services.

Do you know what debt costs? Do you know how poor debt management impacts your credit history? If you're credit history is poor, chances are very good that you're paying for it - every time you try to pay off debt and every time you buy anything.

Read Our Independant Credit Repair Company Reviews

What every consumer should know about debt

1) Credit card debt tops the list of "bad" debt

Americans love their credit cards. It is estimated that the average credit card debt held by any American who has at least one credit card is between $7000 - $10000. As well, these card holders pay interest on their credit card debt at an average rate of between 15-18%. Most financial experts agree that credit card debt is among the worst types of debt to have.

2) Many financial experts make a distinction between "good" debt and "bad" debt.

As mentioned above, credit card debt certainly falls into the category of "bad" debt. Any debt that is assumed for reasons of 'quick' consumption is usually considered bad. This would include meals at restaurants, vacations and most household items. These things contribute in no positive way to building assets or investments. Many people consider (affordable) mortgages on homes and education debt to fall into the category of "good" debt. Many financial advisors include automobiles in this category as well. However, automobiles depreciate quickly, and this is why not all financial advisors agree on this point.

3) Always pay off high interest debts as fast as possible.

Every consumer should strive to pay off high interest debts first, then work on every other debt on the list according to what interest rates are being charged. The key here is to pay less interest overall, leaving more money to pay off principle.

4) Understand your spending.

Countless studies and surveys have been carried out that seek to understand how consumers spend their money. One fact seems to inevitably appear. Americans do not know how they spend their money. This is not surprising, as we've all either said to ourselves or heard it said that "I just don't know where it all goes". There is really no reason for this, and many believe this is the strongest contributing factor to why so few people save and invest money and find it so difficult to pay off debt.

5) Don't just pay "the minimum".

Only paying the "minimum payment due" on credit cards, for example, barely covers the interest owed, never mind the principle. The end result is debt that, in the long term, costs you hundreds and thousands more than the debt itself.

6) Be careful borrowing.

Always think very carefully about borrowing against your 401(k) or your home. The potential results can be disastrous, leaving you short of money for retirement and even losing your home.

7) Always keep a cash cushion.

Many experts agree that individuals should have 3-6 months worth of monthly income saved and put aside at all times. This helps to prevent job loss or financial emergencies from devastating your life.

8) Understand the realities of mortgage interest.

Mortgages often tend to have lower interest rates than a number of other kinds of debt. Know that the interest paid on the first $1 million of a mortgage loan is deductible. As well, understand what rate your mortgage is at. Consider refinancing if it's too high.

9) If you cannot effectively manage debt, seek help immediately.

This is a very important point made by financial advisors. Unfortunately, people are often embarrassed about high debt levels and an inability to pay debt off. This is a huge mistake, as developing a debt management plan early can save you hundreds and even thousands of dollars. It can also prevent a bad credit history from impacting your ability to borrow in the future. Finding an effective debt management program is your first step to building a secure financial future.

Do you need help to get your debt under control?

Learn more about debt management and budgeting. Practical Money Skills for Consumers provides debt management calculators and other useful tools.