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The Most Common Types Of Debt

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Debt is the new four letter word and most of us are guilty of it. Many are finding that incurring debt is impossible to avoid and many more are finding that getting out of debt is improbable. The average American family is in debt and not just a few hundred dollars either, but several thousands of dollars some even reaching hundred of thousands of dollars.

The most common type of debt are home mortgages but there are other debts that should be explored especially before you incur them. These debts which are among some of the most common behind those mortgages are car payments, credit card balances, and student loans.

The world seems to work on credit. Many consumers find that they are in need of something like a new purse, a new car, or an education but chances are high that they just don’t have enough money to cover those expenses. With the help of loans consumers are able to purchase these items quickly and easily and for the moment will not have to worry about paying the expense off. So, before you go out and find a new debt, make sure you know what your are getting yourself into. You do not want to switch into panic mode when that first bill comes.

Car Payments

Under normal economic circumstances, car payments are a small nuisance at best but when times are hard and belts are tightened that car payment turns into a burden. If you find yourself unable to afford those car payments then you need to jump into action immediately. Chances are good that if your car is repossessed then those financial difficulties will snowball out of control.

Refinancing your car loan is a popular course of action. However, many are finding it difficult to find a refinancing plan that is affordable which causes another set of problems and issues. If you find that you can not make car payments, then it might be time to get something more affordable. Selling the car, with the loan is an alternative. You will still need to pay off the loan balance but you should be able to do this with the proceeds from the sale. Then, with the money left buy a used car. Sure, it may not be pretty but it will be your car and you will no longer be obligated to a loan.

Credit Card Debt

Second only to Mortgage debt, credit card debt is a main factor of worry and stress for families. While having one credit card is often recommended, having more then two or seven or twelve is just foolish. Start paying off more then the minimum requirement each month so you can close out some of those cards. Keep one active for emergencies but make sure you keep up with the payments. Most of the credit card debt incurred is from penalties and late fees so keep that in mind as you get ready to send in a payment.

Student Loans

This debt is a biggie but if you are smart, hopefully college will teach you about Russian Literature along with being financially savvy, you will be able to handle this debt with a certain amount of grace.

First, students should use loans as a last resort. If you can not find a grant to suit your needs then get a loan that is offered by the government since these loans tend to have better conditions then bank loans. If you do need a bank loan then proceed with extreme caution. Student loans do not activate until you graduate college. This means you have several years to plan and save money towards paying off the loan. Every little bit helps so that five dollars a week can really add up after four or six years.

Student loans are seen as a necessary evil since many college students need them to receive an education.

Sometimes loans are needed but when they become unmanageable debts they are a problem. Get to know what kind of debts are out there, what to do about them, and how to avoid them if possible. If you do need those debts then learn how to manage those debts in a responsible manner.

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