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Everyone will get into debt at some point during their life and there are lots of types of debt that can actually be positive. For example, getting a mortgage that you can afford is a good type of debt. Similarly, investing in your future with a student loan is also a good debt if you make sure that the course you do will help you to get a higher paid job in the future.
However, there are some bad types of debt and these can have a huge impact on your life. Credit card debt is one of the most common types of bad debt as the interest rates are often sky high and you aren’t necessarily using the money wisely in the first place.
Living a debt-free life is possible for everyone and understanding good and bad debt is critical for your financial health. Even if you are saddled with a lot of high-interest debt now, with some determination and a bit of money-savvy thinking, you can be leading a debt-free life sooner than you might think.
How to Break Free of Bad Debt
Credit cards and personal loans are really very tempting, especially when you aren’t quite making ends meet. Unfortunately, this type of loan often comes with a high-interest return that can end up costing you far more than you ever considered. Just one default on this type of loan and things can quickly spiral out of your control.
One of the best ways to deal with bad debt is to get some advice about joining a government program for credit card debt relief. There are a few options open to you to help you deal with your credit card debts and though all of them will have an impact on your credit rating, they will help you out of the red.
Depending on the nature of your problem with debt, it is likely that a debt consolidation programme will be a lot of help. This is a scheme where you pay off your high-interest loans by taking out a lower interest loan secured to your assets – usually, this means your home or car. Have a look for companies accredited by either the NFCC or the FCAA.
Budgeting for the Future
Getting out of debt is a long process and can take you around 7 years, even with a debt consolidation program. Over these years, it might be tempting to get back into bad habits but if you want to succeed and live debt-free, you must resist the temptation to take out any new loans.
Learning to live within your means is a tough lesson, especially if you have been using credit cards to treat yourself. However, it is possible to balance your budget to ensure that all your needs are met and some of your wants can be achieved. Create a separate savings account to pay all your bills and put the right amount of money in for the month. Whatever is left you can spend how you like. Or you can save it up for something bigger later on.
It’s your choice.