Debt can be a challenging thing — and very personal, with people taking it on based on things they need and/or want versus what they can afford in the moment. And of course, usually not inclined to discuss it with each other to help for those experiencing challenges.
Over time, it can be helpful to take on some strategic debt you pay down over time because it shows you can take on a financial responsibility and properly manage it.
However it can also be easy to take on too much. Almost everywhere you shop encourages you to open a credit card with them to get a discount — whether you’re making a more standard purchase or a bigger ticket one. Lenders are often willing to offer it to you even when you it might be more than you can handle; which sets you up for a bad situation. Before too long, too many items over time then add up to a lot, especially if layered on top of something large, like college loans. And especially because those cards tend to come with a higher interest rate.
If you’ve found yourself suddenly overwhelmed with your debt, you’re not alone. One study found about 59 million US adults added to their credit card debt since the beginning of the COVID-19 pandemic in March 2020. That’s 42% of all US adults!
But what can you do now that you find yourself in this situation?
It can be easy to be proud when it comes to your finances but pause, breathe and remember all is not lost. The worst thing you can do is to become overwhelmed and miss payments on multiple or all of your accounts. Here are some things to consider as you’re taking on debt to set yourself up for success.
Closely monitor terms for any debt you take on. What is the associated interest rate and who is the lender? The average credit card interest rate is 18.04%! That means less of that monthly payment than you think will actually go to paying off your debt and a lot towards that APR (annual percentage rate.)
Keep an eye on your debt to asset ratio. Like I said, lenders will typically approve you to take on more debt than you really should. Remember they’re only giving you access to the money to help you because they see dollar signs in their favor in the arrangement! Keep a running tally of the debt you have so you’re not taking on new debt in a vacuum.
Don’t be too proud to ask for help. If you find yourself pushed too far with what you’ve taken on, consumer credit counseling can help. It can help you to get access to personal sessions with a financial expert to give you custom advise.
Consumer credit counseling can also help to keep you out of court, which is especially important if you have defaulted on some of your debts. It can help with a number of types of debt, ranging from student loans to car loans to medical bills.
Most initial sessions are free. There are also non-profit credit counselors which are free or at a reduced rate. Learn more here.
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