No matter who you are, there is nothing enjoyable about owing money. Yet there are hugely varying degrees to which extent debt can weigh you down, if at all. For some, it can be crippling, and make it a struggle to keep your head above water. But in other cases, it can be perfectly normal, and even a great enabler.
For example, there is nothing unduly stressful about paying off a mortgage, and of course such a form of debt is vital to make the step onto the property ladder. The same is true of something like car finance, while even personal loans can be a productive means of making life-changing purchases.
Further to that, interest rates are actually at historic lows, which can actually make borrowing money a perfectly sensible, logical course of action.
The key is to exercise discretion, and to not get bogged down by debt which is unnecessarily expensive to service. Good examples of these are credit cards and store cards, which often have APRs of 20 per cent or more. It’s understandable why people use these types of cards. Firstly, they are a very convenient way to spend. Also, they tend to have good reward schemes built in. And as a bonus, using unsecured credit like this is a good way of building up your credit rating.
The difficulty comes in when you are no longer able to clear your balance at the end of each month, or, worse still, are left making minimum repayments. This can begin to entrench the debt cycle, as you end up making precious little headway on the capital amount owed, and the interest owed begins to spiral as you spend more and more.
SOLUTIONS TO THE PROBLEM
If you are already in a situation whereby you are unable to make significant progress at chipping away at credit card debt, then it will almost certainly be beneficial to consider a 0% balance transfer. This involves arranging to have your entire credit card balance transferred to a new card, and having a set period (sometimes as long as 42 months) in which you can pay off the balance, free of interest. The only caveat is that once this window of interest-free repayments lapses, you return to extortionate APRs once again, hence it being important to clear the balance in time.
The alternative is a debt consolidation loan, whereby you pile all your high-interest debt(s) into a single low-cost personal loan. With a multitude of online lenders, and the market for loans having become more competitive in recent years, there are a number of good options out there which should help you save an enormous chunk on your interest owed.
KEEPING YOUR HOUSE IN ORDER
Of course, the best solution of all to stay away from debt troubles is to try and avoid becoming unduly dependent on it as far as possible. Keeping a lid on spending, being prudent with savings and ultimately living within your means remains the golden ticket in that respect.
But debt itself is often shrouded in stigma, and sometimes even shame. This need not be the case, and, as mentioned above, borrowing money often serves a very helpful purpose, when done shrewdly. The key with debt is to manage it effectively, make it as cheap as you possibly can, and prioritise paying it off so that it is an enabler of good times, rather than being a source of stress.
The process of retirement has many benefits, but it also comes with difficulties such as a lower income level. A reverse mortgage can help you to overcome those financial difficulties because such a reverse loan will give you extra money without increasing the immediate bills you have to pay. Unlike a traditional home loan, reverse mortgage repayment can be done on an extended schedule. You will continue to own your home after receiving funds from a reverse mortgage lender, and you will still be responsible for paying associated taxes and maintenance costs on your home throughout the loan duration. However, you will have the additional security of knowing you cannot default on the loan or be evicted from your home as long as you continue to reside in it.
1 thought on “Debt: Friend or Foe?”
Sound advice as always x