Debt Management and Loans Advise

Sometimes, we may not understand how credit works for our economy; but mind you, it plays an important role. Without credit, we would not be able to purchase our own house and major possessions. In our lifetime, it is common that we will have various types of credits or loans, and with different lenders. Going for a loan is a huge responsibility, hence, we need to learn how to manage our loans and debt.

We need to recognize when a little debt is too much for us to take. Learn to recognize when little debt is “acceptable” and if it will place you in a potential dangerous situation. For few of us, the “red flags” are clear, but for many, the clues may be vague or unrecognizable.

Perhaps, you can consider asking these few questions, to assess yourself where your debt situation is.

> Will the increasing percentage of your earnings able to cover your debt?

> Is your savings status is not enough or even nonexistent?

> Are you at the brink or edge at the limit of your lines of credit?

> Are you only able to make the minimum payments on your revolving charge accounts?

> Have you been extending repayment schedules – paying in 60 or 90 day bills once paid in 30?

> Are you chronically late in paying your bills? Are you paying bills with money earmarked for something     else?

> Borrowing money to pay for items you used to buy with cash?

> In case that you lost a job or no source of income at a certain point, will you be in immediate financial difficulty?

> Do you have an exact figure of how much you owe?

> Are you fidgeting with the thoughts of having your car, house or credit cards that threatens your of a legal action?

If your answers for these questions are “YES”, you should take some time to reflect or assess your finances. While a single “YES” is not a sign of impending financial horror, there may already an indication that you need to make some drastic changes on your financial transactions.

From here, you have to establish personal financial priorities. When recovering from a personal setback, you’ll likely find yourself having to establish financial priorities to focus your effort and resources. Not all your household debts will equally impact your family. Your first payment priorities should all bills associated with essential needs, utilities, food, mortgage or rent, and insurance. While you can most likely find ways to save on all of these bills, by cutting back and negotiating lower rates, paying them is extremely important.

After you decide what your priorities are, review your budget and determine which of your bills are not being fully paid. Contact your creditors to discuss your situation and you want to pay your bills but due to your setback, are unable to. In some situations, you may be able to get a new payment plan.

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