Too many Americans are struggling with having excessive debt. For many, debt is the only way they can get through a financial emergency. Unfortunately, this only adds to an already difficult financial situation. Understanding debt and borrowing will help you make better borrowing decisions and eliminating unnecessary debt.
Debt: something, typically money, that is owed or due.
Two things you can do with debt
Forgive it, if you’re the lender
The responsibility to repay is always on the borrower (attitude)
After borrowing some may feel like they got a bad deal - interest too high, late fees, over the limit fees.
Some use it as an excuse to not repay, pay late, or try to negotiate a lower payoff.
Understand the risk and try to avoid using credit in the future when you're unsure if you can pay it back.
Secured vs Unsecured Debt
Secured by an asset
Cell Phone Service, Cable, Internet Bills.
These typically have higher interest rates because the lender has less leverage.
Always have a sure way to pay.
Asset stands for the value of the debt.
A savings account that has enough to cover the debt.
A detailed budget that has margin in it to cover payments.
Consider the potential of a job loss.
A 3-6 month emergency fund is super helpful.
Can be a benefit if used wisely.
Allows you to purchase something you may otherwise not be able to.
Start a business.
Limit risk by always putting a 20% or more down payment.
Only borrow for appreciating not depreciating assets
3 Way to Get Out of Debt
1. Debt consolidation
Lower interest rates.
One payment instead of many.
3 to 5-year max time to pay off debts.
Must fit into your budget - a financial interview is required.
2. Debt negotiation
Negotiate your balance down to 50% or less than originally borrowed.
The company gets between you and the creditors (cease and decease letter).
Can’t protect you from being sued by your creditors.
A creditor may seek a judgment to avoid the statute of limitation.
Able to go after the debt anytime in the future - freeze accounts and garnish wages.
3. Best and cheapest option - do it yourself!
Don’t give your problem to someone else to fix or you’re destined to repeat it.
Debt snowball repayment strategy.
Use form and how-to video @ leosabo.com/resources
Not all borrowing is bad.
Avoid borrowing for depreciating assets.
Use wisdom whenever borrowing.