Debt Management and Debt Consolidation Part 9
by Clifton

Different Types of debts

Credit Card Debt
Credit card debts is the most common and the worst kind of debt. The debt build up is quick and to get out of it is pretty difficult. Their interest is ridiculous coupled with late charges and misc. fees. This is the first debt you should consider to eliminate. And not surprisingly this is the number one danger that most people fall into. To prevent them from happening, if you can leave them at home while shopping. Don't spend more than you can afford. Owning a credit card is not a sin but misusing it will ruin your life. If you need to pay with your credit card, make sure you have the money to return full at the end of the month. And please stop lying to yourself saying that I can afford to pay the minimum sum every month. If unfortunately you are already in debt with the credit cards, shop around for the lowest interest rates and transfer the rest of the cards to it, this way you only write one check and enjoy a lower interest. At times you can also talk to the banks representative and ask for lower interest or maybe a smaller minimum sum payment. Talk to them nicely even though they can be nasty at times, they are just doing their job, and don't make empty promises.

Medical bills
Medical bills are something inexpected in life, you will never know when you will be sick. Plenty of exercise, eating right will help you in getting into medical debts. And most importantly but medical insurance. When you are young, you never thought that this is essential but when you get older so does the cost of medical insurance grows dearer. In all ways to prevent yourself into getting this debt, but medical insurance. If you are already in trouble with medical debts remember that the hospital will not throw you in jail, neither will they take out your liver. Always try to talk to your debtors first, this is the most sane thing to do, act first. If they threaten to sue, work out a package that is acceptable to them and don't make promises that you can't keep or pay.

Home loans
Home loans are something almost everybody has. You need to understand the different kinds of loans before you take up one. The first one is adjustable loans, these are loans that goes up and down with their interest rates. When the economy is good, it goes up but when it's bad you guessed it. It could be a good loan to people who doesn't have a fixed income, namely salespersons... if the economy is doing well, people tend to spend more and the little increase in the interest won't hurt much. But not so for those who have a fixed income job, if the interest rates goes up, that does not mean your boss is giving you a raise. The second type of home loan is the fixed-rate home loan, where the interest is fixed and that depends on the right timing you take up the loan. It does has it's advantages as it allows you to budget easier than other loans. Finally you have the balloon loans, this type of loans have their interest rates increase as time grows. People who take up this type of loan will assume that they will make more money when they grow older. As a conservative budget, it is advisable to stay out of balloon loans as you cannot predict the future. As the saying goes, things don't always work out as planned. To prevent yourself getting into trouble with home loans, you should always look at your job security first, plan your family and calculate how much you can spend on furnishings and renovations. Whatever you are budgeting, your home loan should always be the first on top of the list because you don't want to end up in the streets. If you really can't afford to make any payments, try refinancing or debt consolidation loans or better down-size it. It will be a pain to lose that study room of yours, but that definitely beats sleeping in the streets. Try talking to your lenders, negotiate a better package for yourself, throwing you out of the house is the last thing they will do.

Auto loans
Auto loans is another problem. If you are driving a car that draws too much attention and draws too much out of your bank, you are in trouble. Do you realise that most people got into debt simply because they can't control the temptation of trying to impress too much. If you are planning to get yourself a vehicle, first you have to do some calculations to see whether you can afford it. If it is your first time getting a car, do some research or get some advice from your friends who already own one. There are more things to consider than you think there are, things like fuel efficiency, maintainence, parts etc.. Before signing on the dotted line find out who your lenders are, if it is from a dealership, chances are their interest are way high and they give no excuse to repossess your car if you miss any payments. Whatever it is, the best deal still comes from the banks as their interest are lower and repossessing your car is not a simple thing. Even after you finally got your car, you have to be sure to stay out of fines, accidents, as premiums of the car insurance will increase if you meet with an accident. So you have to drive with care and take good care of your investment. What if you are already behind some payments, try refinancing it, the interest maybe higher and you will be paying longer but nowadays you really need a car to get things done. Secondly, you may want to consider trading it with a smaller and less expensive car. Finally, try talking to your lender, in most cases the lender will give you some chances than receive nothing from you at all.

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