Whether you find yourself struggling month to month to pay your bills, fear the looming calls from debt collectors or even worry about potentially losing your home or car, it is important to recognize that there is hope. Thousands of Americans face the financial crisis of seemingly overwhelming debt. With the aid of debt management services through certified credit counseling, debt relief may be just around the corner. Whether you or someone you know finds themselves facing an uphill struggle against debt, the first step toward financial freedom always comes with better understanding your debt.
Understanding Your Debt: Financial Litmus Test
Using free budget building tools and organizing your debts can help you better analysis your debt while you attempt to develop strategies to pay back your debts. Once you have organized and budgeted both your debts and your income, you can begin to understand how much debt you really owe. The total amount of debt you end up paying back will be the principal amounts of your loans combined with the interest rates. Paying special attention to the interest rates on your debts and bills will help you develop the best strategy to paying off your debts in the cheapest and least amount of time.
Good Debt v. Bad Debt
Like most things in life, debt is not a one-sided coin. Instead, debt can generally be categorized into two different categories – good debt and bad debt. Any major purchase you make can prove to be either favorable or deteriorating to your financial situation, so be certain to consider how long it will take you to pay off any new debts before you agree to take it on.
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Good Debt generally refers to those types of debt that can be viewed as an improvement to your personal net worth and financial standing. Investments that increase in value over the long-term such as funding a college education, taking out a mortgage on a new home, an auto loan or other investments that can improve your future financial standing are all considered good debt. Most good debts have low interest rates that may be tax deductible.
Bad debts include those purchases that tend to quickly lose value or do not generate any long-term income. More often than not, these bad debts are combined with high interest rates that can quickly compound the total cost of your debt. With bad debt, it is generally a good philosophy to avoid purchasing if you can’t afford it and don’t need it.
Getting Back on Track with Debt Management
Careful budgeting of your income and making smart purchases can help put you on course towards financial freedom. A credit counseling service can help provide you with a list of all your debts as well as the amount of time it will take you to pay off each debt. Often, a credit counseling service can help you regain control of your finances with debt management and eliminate your debt in a 3-5 year time span. Sitting down with a credit counselor at a certified credit counseling agency can help you to plan the best course of action when it comes to repaying your debt and how much to pay each month to minimize the end costs of your debt. Enrolling in a debt management program may help you negotiate lower interest rates, have late fees waived, lower your monthly payments and help you get current on your bills.
Advantage Credit Counseling Service has been helping their clients get out of debt for over 40 years. The certified credit counselors at Advantage CCS will help you learn to better manage your money while developing a strategy for your stress-free financial future. Contact Advantage CCS today at 1.866.699.2227 to get started on your personalized debt management plan.