Managing Debt Is More Important Than Avoiding It'

 When considering the question of your household finances, there are few words that have connotations quite as scary as ‘debt.’ However, the truth is that debt will be a reality for the vast majority of us, including the affluent and secure. While avoiding unmanageable debt is important, learning how to effectively manage the debt that you need to take on is important, too.

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Protect your credit score

Your credit score is going to play a huge role in how you can manage your debt. For one, higher credit scores allow you to choose from a wider range of loans, which can make them easier to pay off. As such, you should make sure that you’re using credit agencies such as Equifax to make sure that you’re aware of your credit score (and whether it needs some work), as well as what you can do to fix them. This can include making sure you’re current with any debts, disputing and removing false records from your credit report, and more.

Choose the right loan options

Aside from making sure that your credit is in a good place so that you have options, it’s important to take your time to compare and weigh those options as well. Don’t just go with the first loan or credit card that you see. Sites like Compare Credit can help you get a better idea of what, exactly might be on offer for you, using specific information like your credit score to help you get more precise loans and cards suited to your needs. This way, you can make sure that you’re not taking on a loan with a higher APR or stricter repayment terms than you might be able to find elsewhere.

Have a precise payment plan

When you have debt, you should also have a structured and precise plan on how you’re going to pay it off. Usually, the easiest method to recommend is to make sure that you’re focusing on paying off one debt at a time, so you can close it earlier and get to paying off the others. But you should make sure that you’re using bill reminders so that you’re not unaware of any payments coming up. If you don’t have the money in your bank to pay them, this can escalate your debt, either adding late payment fees or even getting collections agencies involved (which you definitely want to avoid).

Don’t just pay the minimum

Even if you’re focusing on one debt above the others at a given time, you want to make sure that you’re paying more than the minimum on any debt that you have. There are some debts, such as mortgages, that you don’t want to pay down early, but others can be paid off more quickly to save you money by reducing the amount that you have to pay on interest by the end.

Many of us willingly take on debt, whether it’s to deal with slightly larger expenses than usual, to secure a home, buy a new car, or to help deal with an emergency. At that point, avoidance is too late. You need to know how to manage it.

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