The average American has around thirty eight thousand dollars in debt and this figure does not include their mortgage. It is easy to create debt and hard to get rid of it. You can take on debt in a matter of minutes and it could take years and years to get rid of it. Even after you financially satisfy your debt your credit score will still suffer the effects for five to seven years. Let’s look at some of the most common ways people find themselves drowning in debt.
A majority of people don’t have trust funds that will pay for their college education so they have to find ways to pay for it themselves. The easiest way to pay for your college education is through student loans. The average cost of a semester at a non-private university is around five thousand dollars. So you do the math, if you have a four year degree then you are probably around forty thousand dollars in student loan debt and if you have a doctorate degree then you are well over one hundred thousand dollars in the hole. Although these types of loans are regulated differently than a traditional loan they still have to be repaid with interest.
Here is where things can get really out of control for your debt situation. Credit cards are easy to get if you have good credit and they are easy to use. It’s easy to charge more than you intended to on your credit card. Then you will find yourself making large minimum payments every month with your balance not going down much at all. Interest rates are usually anywhere from eleven percent to twenty nine percent. With these types of interest rates it will take you years and years to pay off the balance just making minimum payments.
These are the absolute worst kind of loans that any consumer can get. The interest rate on a payday loan will average out to be anywhere from three hundred and fifty percent to eight hundred percent. These are astronautically high interest rates and they are definitely built for failure. If you are already low enough on money that you have to resort to a payday loan then you are probably not going to be able to keep up with the payments and you will default on the loan. These types of loans should never be an option for you if you are low on cash or find yourself not being able to pay your bills. If your situation is that serious then you should consider a bankruptcy law firm birmingham al and file for bankruptcy.
If you do find yourself drowning in debt the best thing you can do is to stop spending. Don’t close your credit card accounts because that will hurt your credit score, but you should cut them up and not charge anything else on them and pay as much as you can on them each month. Take a look at your living expenses and get rid of anything that you don’t need in order to save more money to pay down your debt.