Ways to Stay Away from Bad Debts

Introduction: In this day and age we all rely on loans for a lot of things. However, there is still a huge possibility for us to get bad credit. Yes, bad credit isn’t just caused by irresponsibility or laziness on your part – there are different circumstances in life that can cause you to become a victim of bad credit. Here are some ways to avoid them.

Things You’ll Need: Proper planning, some self control, budgeting skills, debit or prepaidcards

Step 1. The first thing that you should do is to make a budget plan. Your plan should contain all that is necessary when it comes to finances. Stick to your proposed budget every month, and don’t spend more money than what you absolutely need. Channel all your extra money to paying your loans or into your savings.

Step 2: Do away with Plastics. Swiping may be easier, hassle free and sometimes safer because you won’t need to carry on cash along with you but this makes you dependent to it. Credit cards lure people to purchase things they don’t really need because of the thought that it can be paid the next time around. When the credit card statement arrives, it shocks you to know that you have paid more of the interest than the principal itself. This will surely be the start of your debt problems.

Instead of getting credit cards, why not apply for a prepaid or debit card. This way, you still don’t need to bring cash, but you can spend only what you have. Think about it, you don’t even need to deal with credit card statements each month. Just make sure that you have separate accounts for your debit account and savings account, lest you may be tempted to spend all your money.

Step 3: Choose a credit card with low interest rates if you are still tempted to get one.

Step 4. Avoid getting loans other than your mortgage (or car loan), and don’t loan money for unecessary things. Loan companies have big interest rates, especially when you get a fast loan. They may seem great at first but they’ll cause you more problems than you think. Better save your money each month until you have enough to buy what you want.

Step 5. In case you are terminated from your job, or if you have an illness or injury that may prevent you from working for a while, visit your creditor right away. Let them know about your current situation. They will gladly fix up an arrangement for you so long as you do not default payments with them.

Tips:

It is very important to be prompt in all your monthly bills. If you have extra money, pay more than the minimum required payment for your loans. List down everything on your budget, and keep track of all the things that you spend.

Warnings: Avoid signing up for credit check since this will lower your credit rating.

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