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Although consumers should always look toward a debt management agency when debt problems become insurmountable, there are a few tips they can follow when dealing with debt. These tips can help a consumer create a sound debt payment strategy, whilst simultaneously ensuring that they do not fall into over-indebtedness.
- Always pay debts on or before the due date. Doing so will ensure a healthy relationship with your creditors, and secondly prevent the recording of late payments on your credit score. Prompt payment can also guard against added interest and penalties.
- When working out debt payments, immediately add 10% to the minimum payment due. The benefit of this is that it helps consumers to pay off their debts sooner, while at the same preparing them for unexpected hikes in payment. Therefore if interest rates climb and the debt payment becomes more, it is already a part of the consumer’s budget.
- Consumers should also avoid incurring bad debts – therefore store accounts, credit cards and short term loans should be avoided. If you already have debts like these, focus on paying them off first and closing off the accounts. Managing these debts effectively will prevent you from paying exorbitant interest rates and guard against sudden payment increases.
- Debt consolidation is always a good idea – even if a consumer is not facing debt problems. This is because it is much easier for the consumers to manage one debt payment on a loan per month, than to manage a myriad of minor payments, and possibly missing one or two. It can also greatly reduce the amount owed on debt, as debt consolidation loans may carry lower interest rates.
It is pertinent that consumers always consider a debt carefully before signing the dotted line. If a consumer does take on a debt, they should apply sound debt management in order to avoid becoming over-indebted.
Article written by: Andrea van Tonder 07-2013