Escape the Credit Trap
Many people fall into the trap every day. They start to use
their credit cards more and more, just a little bit at a time.
One day they wake up deep in debt. The average American consumer
has 9 credit cards and 52% of Americans owe over $5,000 on
credit cards and/or installment financing plans. About 15% of
creditors have their credit cards at over 80% of their credit
limits. That can spell big trouble. If you are one of those who
are maxed out on your credit cards or rapidly approaching it,
you've got to do something about it, and soon.
The problem is many folks depend upon their credit cards and
revolving charge accounts. They are using them for the
convenience and, in many cases, to maintain a lifestyle they can
ill afford to keep. If you are a convenience credit user who
pays all, or most of their outstanding balance every month, you
will have few problems. If, however, you find yourself getting
deeper and deeper in debt every month, you must take action now.
Failure to do so may mire you deep in a credit hole you may not
be able to escape.
You have several options to help your credit picture, but the one thing
you must do in order for any of them to work is control your
spending. There will always be life's emergencies such as a big
medical bill or unexpected car repair. These are mostly
unavoidable. If, however, you have a pattern of spending up your
credit balances every month just to maintain a lifestyle, you've
got to stop now. Once you have your spending under control, you
can examine your options.
One option is to get another job or source of income. You can
work evenings or weekends. If you have special expertise in a
certain area, you may be able to become a part time consultant.
Some consulting work is very lucrative. You can also start a
part time business, but in most cases this will take a bit of
capital to get going. There are, however, many business that you
can begin for just a little money, but these will still take
time and effort if you are to be successful. You want to be
careful that you don't begin a business with no plan and then
find yourself even deeper in debt with very little additional
income to show for it. If you do plan on starting a business to
earn some additional income, do yourself a big favor. Do plenty
of research to find the proper business and then do a good
business plan. Revise the plan as necessary, but do your best to
stick to it. Taking these steps will really help ensure your
success.
For many people, who are just a little bit upside down in their
cash flow every month, a great option can be a debt
consolidation loan. If you own your home or other substantial
real estate to use as collateral, there are many lenders who
will give you a low interest loan to pay off your many
different, high interest loans. This is beneficial in a few
ways. The primary benefit is that you can substantially lower
your total monthly payment by using a consolidation loan instead
of having multiple credit cards.
In addition, it is much more convenient to replace many loans
with one. It will involve much less time and paperwork to pay
your bills every month. You will also be less likely to forget
to pay one of your credit card bills. Missing, or being late on,
a payment can begin what is known as the "credit card death
spiral". Most creditors will raise your interest rate, charge a
late fee, or both. In most cases, they will most likely hit you
with both options. The interest rate will raise your minimum
monthly payment. If you were right on the edge of being able to
afford the minimum monthly payment, the increase can send you
over that edge.
A consolidation loan can really help with your monthly finances.
However, such a loan can also have a dark side. Because your
home is usually the collateral that secures the loan, you can
lose your home if you default. This is the reason it is vital to
curb your excess spending. You must be able to consistently make
the monthly payment on the consolidation loan.
Credit can be a great thing. It lets you buy a home, run a
successful business, drive a nice car and have access to extra
cash in emergencies. It can also suck you in and create a
dependency. You can, like many Americans, become addicted to the
added spending power it allows. If you are not careful, you can
find out it was all an illusion, and you are now in trouble.
Take control of your credit while you can. Before it's too late.