Monday, January 14

Removing the Burden of Debt

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If you face some crushing debt burdens, from credit cards or payday loans, you may wonder if you'll ever get out of the cycle of debt. A short-term loan like a cash advance is one way to avoid recurring debt, if used wisely. Used improperly, it can end up costing you much more than what you originally understood. This happens mostly when paycheck loans are used without understanding that they work best as short-term loans. You can decide to refinance the loan, but this will usually outweigh the benefits of taking it out in the first place and convert it from a short-term solution to a lengthier debt burden.

While debt is a fact of life in modern America, recurring debt doesn't have to be. There are times when you want to be able to get loans to finance emergencies like a broken down car or an unexpected medical bill. But, once the emergency is over the bill should be paid in full as quickly as possible. The problems can increase when a bill is not paid when it is due, and instead it is rolled over into a new loan. At that time penalties and fees may be levied for missing the original due date or the interest rate increases. This can make you end up paying two or three times the actual cost of your emergency.

If you find yourself in debt, seek to settle your accounts as quickly as possible, negotiating with your lender for a payment plan you can meet. You can reduce your risk of not meeting the due date by limiting the amount of money you withdraw. Then, if you do need more, that will be available after you pay off the first loan. In the meantime, try to put aside any small amount to start building an emergency fund. It doesn't have to be large; it can be $10/week. If at the end of two months you haven't used the money, you will have $80 in an emergency fund. This isn't much, but the psychological lift of seeing some savings is better than having no savings and feeling burdened by debt too.