How to Get Out of Debt
Debt. A word so ugly and heavy it’s hard to even say it without drooping a bit. Just a little bad luck or some less-than-perfect spending decisions and the next thing you know, debt can take over your life. It can get so bad that even grab lunch at a take-out place or pick up the dry cleaning becomes a guilt-laden task.
The staff at Apartments.com has experienced their fair share of money woes and would like to offer some advice. The good news is that you do have options and by just taking the first steps toward pulling yourself out of the hole, you start to feel better!
Step One: Know the Real Credit Facts!
The good news…
- It is possible to get out, and stay out, of debt. It is true that the average American has $8,400 of credit debt, but it is also true that only 1 in 20 Americans owes $8,000 or more.
- Most households owe balances that are $2,000 or less.
- Only 1% of Americans have over $20,000 of credit card debt.
The bad news…
- The percentage of disposable income used to pay debts is at a record high in this country.
- Personal bankruptcy hit a new high in 2003.
Step Two: Quick—Put Down That Credit Card! Like nothing else in the modern world, credit cards can go from a blessing to a burden in a heartbeat. When you needed a quick loan for car repairs or an emergency road trip, the old credit card was there. But before you knew it, it took on a life on its own and is now sucking your bank account dry with its enormous hidden fangs, the interest rate. This monster’s power is multiplying every month and will soon steal your ability to get a good rate on a loan or even rent an apartment. If you have a high balance on your cards, stop it now by ONLY using the money you have in the bank, unless it’s an emergency.
Step Three: Learn the difference between good debt and bad debt. It’s kind of like when you first found out about good fat and bad fat and thought, “There’s good fat? How’s that?” Well, debt works like that, too. While too much of anything can fall under the bad category, some types of debt are almost necessary for most people to have in order to live their lives. Good debt means the interest rate is below 10% and the funds will appreciate in value. This means you’re getting something for your money over time. Student loans and home mortgages fall into this category. Automobile loans on the fence; they have low interest rates but cars very rarely appreciate in value. Any other loans including personal and credit cards are considered bad debt. Now you know what to focus on—get rid of that bad debt! You still need to make payments toward good debt accounts, of course, but you can rest easy knowing that those were smart decisions.
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