Paying Off Debt…
Are you avoiding paying off debt? Paying the minimums could hurt you.. Something as simple as removing a couple of monthly “splurges” such as limiting trips to starbucks could give you additional funds to put towards your debt and make a dent in amounts owed and keep things under control.
Debt to income ratio is helpful to look at when evaluating your finances. Bankrate.com recommends that people’s debt not be more than 20% of take home pay – including your car payment. They recommend that housing expenses not be more than 30% of your monthly income.
Now that every credit card bill comes with a breakdown on how long it will take the consumer to wipe out a debt making only the monthly payments it is a reality check for many people. If the minimum payment is all that is being made, the debt can keep increasing and it can take very long extended periods of time, even decades to pay off the total amount.
Some consumers benefit from credit counseling sessions, these can help identify the biggest areas of concern and help create a debt management plan often times having the creditors agree to lower interest or payments. Two last resort options for consumers in debt can be debt settlement or bankruptcy.
Good post on tightening up the budget to avail more money to pay down debt. I think that if people take time to understand where their money is being spent, then they can start to change their habits. It seems like a lot of problems stemming from having too much debt arises from behavioral issues more than financial issues.
One way that consumers can put more money back into their pocket is to refinance their existing car loan at a lower rate and/or extend their term. Many lender advertise that the avg savings per month ranges between $50-$100. I’d say that anyone who pays more than 8% interest, and who is current on their auto loan payments, ought to consider refi as an option. Applying is free and there are no closing costs.
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