Paying Off debts has always been a crucial decision for you. There are both smart ways and stupid ways to get rid of your debt. The smart ways will help you to minimize the net amount of interest you are paying on different loans, increase the savings and thus brings you back on the track and push you forward to accomplish your financial goals. While on the other hand the stupid ways let you scrambling for the “easiest” solution which indeed doesn’t solve the problem, shell out money from your pocket in a long run and ruin your credit ratings.
Following are some assessments of best and worst ways to manage your debt:
· Smart way- stop spending! Or at least abandon your credit card for a while. You may lock up your cards in a deposit box or you may freeze them in a block of ice (it can cause a damage to the small magnetic strip on the cards back).
· Stupid way- transferring your balance to a card with a teaser rate of 3.7% and then keep charging will not help you. Firstly there is a difference between the rate of buying things and balance transfer; many cards have different rates for a new purchase. Even if the rate of interest is same the teaser rate is going to expire on a fine day leaving you with a huge debt at a high rate.
· Smart way- find a card with a low “fixed rate” which is not scheduled to expire in a three to six months, and transfer your other card balances to that card.
· Stupid way-you can move your balance from card to card every three to six months chasing after low teaser rates, until and unless you are caught by a rate that jump faster than your imagination. Note-opening a lots of credit cards accounts helps you to crash your credit ratings!
· Smart way- pay off your highest rate first, mainly the nondeductible one then use the same payment size to your next –highest rate, nondeductible one. Use this pattern until all of your nondeductible debts are paid off.
· Stupid ways- make extra payment on your mortgage or home equity loans which are tax deductable and also high rate card debts.
· Smart way- if the water really flows down your nose, if you have to borrow from one card to pay off the debt of other card, if you are able to make the minimum payment or if all your debts are slow-poisoning you – then you must turn to anon-profit credit counseling firm.Dont hesitate to seek help from a professional if you can not handle the situation of your own. These firms will negotiate with your creditors to give you a better repayment scope.
· Stupid way- Turn to a high interest debt consolidation loans or a profit-making, mushroomed credit counseling firm that itself makes money by charging you a lump some fee.
Think a while considering your real debt situation whether you want to choose the smart way or the other way to pay off your loans. The first one is always recommended.
