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Monday, February 13, 2017

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4 Simple Ways To Avoid Debt

Oyetoke Tobi - Monday, February 13, 2017
4 Simple Ways To Avoid Debt

Debt! What is Debt?

Well in simple sentence, debt is the state of owing someone something or an obligation to pay or do something. It’s actually one of those stressful things in life that keeps us up at night, over and over again causing depression and anxiety for tens of millions of people around the world.

However, there are many ways to avoid debt and stop the thing that keeps you up at night. Fortunately, I’ve explained four simple ways you can avoid getting into a huge debt or any debt all. And there’s always a saying that says – “Been there done that.”
Here are four ways to avoid debt

1. Decrease the Rate at which you Borrow

The first thing you have to do to avoid debt is to reduce the rate at which you borrow. The higher you borrow, the higher the difficulty of paying back. The amount of debt you borrow will decide how much your credit score will be affected. Credit limits are just like your credit card balances, which is also the same with loan balances and original loan amount. So ensure keep your credit limit at the smallest number achievable in order to avoid getting into a debt, in which in the future, for some reason, you are not able to pay back.

Like I mentioned earlier, the more debt you owe, the harder it is to finish paying it off. Don’t spend money lavishly — it is high time you started saving! Think and always ask yourself anytime you want to buy something, do you need it, or do you want it? So if you “want” it, I think you should reconsider your decisions since you don’t want to end up short in money when your credit card payment is due. You don’t need it, you want it. So you don’t have to buy it in order to save money.

2. Trim Down Your Credit Card Applications

Every time a credit score application is applied for, your credit usually falls by a small amount. However, after a while, all those inquiries can drastically decrease your credit score and affect your chances of receiving low interest. Even though the rate at which your credit falls is small amount, when those small amounts are accumulated over time, it won’t be a small amount. 

Applying for a credit card only involves few clicks and taps nowadays, but being approved for one is a completely different story. Credit scores are usually scaled and if you don’t know how the credit scores are scaled, read below:

300-629: Bad credit
630-689: Average credit
690-719: Good credit
720 and up: Excellent credit

3. Create An Emergency Fund

There’s actually a simple lifehack that cross most people mind. Most people never thought of creating an emergency savings which is actually very simple. After creating one, fill it up quickly with your savings until you have at least $1000. 

Why should you do that? Well, the reason is you never know when you might lose your job, or something expensive in your car breaks or unforeseen responsibility you have to take care of. So it’s always a good idea to have backup money, if you are not able to pay off your credit card bills.

The best amount you can save in an emergency fund should be around $1000-2500, which can keep you comfortable and hassle-free for at least a few months until you get back on your feet. So the faster you saved a lot in your emergency savings account now, the better. Moreover, you can use the savings account to catch up on your mortgage or car payments too.

4. Apply For A Licensed Insolvency Trustee

What is Licensed Insovencly Trustee?

A Licensed Insolvency Trustee (LIT) is the only professional licensed by the Federal Government of Canada to perform services pursuant to Federal legislation called the Bankruptcy and Insolvency Act (“BIA”).

Licensed Insolvency Trustee companies helps trim down all the debt you owe. According to one such company, they declared that their only work is to give ‘debt freedom’ for those who are swamped by any form of debt. This licensed insolvency trustee company is also one of the biggest companies for debt counseling, which is highly recommended for those who are dealing with large amount of debt. The LIT companies understand credit scores like the back of your hand and know the ins and outs of getting rid of debt, at the same time as also rebuilding your credit again.

Each session of their counseling usually lasts 10 to 30 minutes, giving you an optimistic outlook on life after the counseling. They will either give you advice for credit card debt, student loans or bankruptcy. 

Here’s some advice from Sheriff Sole & Madej Inc for those who owe student loans, which is one of the major debt category in the US:

“It is always good to start making payments without delay towards your student loan, even during the six-month grace period. In addition, if you are struggling to make any of your required monthly payments, you can contact National Student Loans Service Centre (NSLSC) to reduce your payments so that they are affordable. NSLSC may reduce the needed monthly payments in case you are able to prove financial need.”



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