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Understanding Debt

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Debt is, quite simply,the money you owe. It is an amount of money, asset or other property that is owed by one person, organization or company.

Getting into debt is very easy, and with the introduction of new ways designed to assist the ordinary man or woman in the street to purchase immediately, it has become quite normal for an individual to carry large – sometimes huge – amounts of debt.

At first glance, people are happy, they can buy without having cash, and they can afford to make major purchases without having to prove their ability to repay.

Debt can, in some respects, be likened to cholesterol.  Much like cholesterol, debt comes in two versions,good and bad. Debts can either make your life easier, or easily ruin your life. Take heart though, no matter how bad your situation is, there are solutions.

People and businesses who know how to handle debts and how to manage credit can take advantage of debts, while others can be always in trouble.  This applies especially to the young, where their problems are made worse by a lack of knowledge.Debts can also be classified as temporary or chronic debts.

In most cases, there are very good reasons to take on debt. For example, students take loans which are probably a necessity now, but you MUST know how to handle and pay off your debts as soon as possible after graduation.

Also taking on debt for setting up a business is good, mainly because this type of debt is called an investment. It depends entirely on how the business, and debt, is structured. You must have a clear plan, know how much money you will need, and  most importantly, how you can pay it back. In such cases, debt is a part of the business success.

If you can afford to pay cash and therefore limit the risk of taking on debt, this is by far the most beneficial plan. Do not hesitate to pay by cash when money is available to you.

The biggest problem is when you borrow money but do not use it productively. Obviously, debts are good when you invest it and NOT simply spend it. Taking on debt just to spend the cash is the worst position to be in. Debts must be under control. You must have a timeframe, a structure and a plan for repaying your debts. Create plans, especially rapid reduction plan. There are many resources available to show you how to proceed with managing your debts and become debt free in half the time.

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Introduction To Fixing Your Credit

America is a country in debt.  Not only is our government in debt, but we are in debt individually, and the problem is not getting any better.  Recent studies have shown that ninety percent of Americans have at least one credit card – and they are using that card consistently.

The average family carries an ongoing balance of between $7,000 and $10,000 on all of their credit cards. Over $1,000 per family goes on interest every year. And that’s just the average – some people owe a lot more!

Overall, Americans spend over $1 trillion every year on their credit cards, and owe more than $500 billion of it. If debt continues at the current rate,  one family in every hundred will be forced into bankruptcy. Over 90% of Americans need to use their disposable incomes to pay back debt.

Add credit card debt to the regular bills we have to pay each month, and the results are obvious.  As a result, some bills go unpaid and others are paid late, incurring penalty interest and of course adding to the debt.

Carrying this level of debt can damage your credit rating, sometimes so much so that you think there’s no way of getting out of debt, and no hope of getting credit for larger purchases, like a home or a car.

The truth is that it is possible to get out of debt and repair your credit to almost the level it was prior to your credit problems.  It takes some time and a little work on your part, but it IS possible.

Loan approvals and such depend on your credit score.  That number is what determines if you can get credit, what your interest rate will be, and how much money potential lenders will give you.  A good median score is 750, but the higher your score is, the more financially sound you are.

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While if it is at all possible, it is a good idea to  stay away from credit, but not everyone has a hundred thousand dollars lying around to buy a home or twenty thousand to buy a car.  Heck, for the majority of people, scraping together five thousand dollars for a good used car would be difficult!  That’s why we need credit.  So we can buy that which we cannot immediately afford. But the key word is immediately, you must have a plan in place to repay this debt.

Where the trouble appears is when people begin to buy everyday items such as groceries and clothing on credit cards.  Then those bills begin to grow quicker than a speeding hare, until pretty soon, the maximum you can pay is the minimum amount due, and the debt noose pulls tighter and tighter.  To add to this, many people just continue charging things, even when they already have a large balance, and no idea how they are going to repay their account.

Your credit score defines who you are in the financial world,and your goal needs to get your score as high as it can be.  It doesn’t matter how bad your credit is now.  There are ways that you can raise your credit score no matter how low it is now.  Don’t worry, the key is to just get started – right away!

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