Simple Ways To Manage Your Personal Debts

June 13, 2017 at 3:50 PM Leave a comment

These days you can find a lot of information on the Internet about the negative aspects of debt, but the truth is that some things cannot be purchased outright. Perhaps you want to buy a home or attend college. While some of us receive inheritances for these purchases most of us have to secure a loan to pay for them. Before signing any loan documentation you should make certain that you understand the terms and conditions associated with it.

Understanding Your Debt

All debts must be repaid. That means you will eventually be responsible for paying back the entire loan amount plus the interest stipulated in your contract terms. Apart from that there can be a wide variety of terms and conditions depending on the type of debt you incur. When it comes to a home mortgage, the most important thing is the rate of interest, whether it is fixed or variable. If you see that the rate of interest is variable then you should understand when such changes occur. Ideally, the tenure for any standard mortgage loan will go up to 30 years with some variability.

The Monthly Payment

Apart from the tenure, you should also understand the monthly repayment schedule. Make sure you understand which part of your payment will go towards the principal, which portion pays the interest on the loan and which portion is kept aside for escrow. If you want to pay off your mortgage early then you should understand how to pay off excess principal. Do you need to include extra documentation with your loan payments or will all excess automatically be used to pay down the loan?

Terms For Credit Cards

These days most of us have a credit card or two. It’s a whole lot easier to carry a card in your wallet then it is to carry a wad of cash. If you have credit cards you should understand how to pay them off each month. If you do not pay them off in a timely manner you can quickly find yourself in debt. If your credit card debts are mounting you will need to know how to consolidate credit card debt. If you plan to consolidate your debts make certain that you understand the terms and penalties as well as the benefits of it. When you use credit cards and don’t pay off the minimum balance then high interest rates can compound over time. Eventually you end up paying much more than the original price of the item you coveted. If you cannot pay your credit card debt in full then you should limit its usage.

Use Some Caution

Be vary wary of the checks offered with credit cards. Sometimes these will arrive in your mail unexpectedly. These typically come with very high interest rates and should not be treated like checks from your checking account. When it comes to debt and your finances you can never be too cautious. Make certain you always understand the terms of any long term or short term loan you sign up for and do not sign any documentation until you are certain you understand the conditions being offered.

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