According to the Federal Reserve, Americans are in debt to the tune of $4.025 trillion as of January 2019. Not only is that a record number, it’s an increase over the previous month. With so much debt on their shoulders, many are enslaved to debt, working their butts off just to make minimum payments. For some, there is no end in sight. If this sounds like your situation, there is hope.
Americans are in debt and struggling to make payments. With half of all households living paycheck to paycheck, they’re essentially enslaved to debt. Sound familiar? If so, you can turn things around. Beware of predatory lenders and learn how to use credit as a positive financial tool. Read the full article to find out how.
Learn How to Bust the Debt Cycle by Using Credit as a Positive Tool.
When Debt becomes Slavery: Your Path Out
The average household was more than $135,000 in debt as of 2018, and that number continues to rise. From mortgage payments and car notes to student loans and credit card bills, Americans just can’t make it. More than half are living paycheck to paycheck with little to no savings to turn to if disaster strikes.
Many experience great stress and anxiety over their financial situation and can’t see a way out. That’s what being enslaved to debt feels like.
How to Spot Financial Predators
We live in a “buy now, pay later” society, which tempts many to take on debt they just can’t afford. There’s more at play, though. Predatory lenders and sky-high interest rates all serve to keep Americans enslaved in debt.
Take your credit card for instance. It could take you years to pay off a small balance if you pay the minimum payment each month. That’s because only a small portion of your minimum payment goes toward the principal balance. The rest goes toward interest, which builds up daily.
Fortunately, there are ways to spot predatory lending and avoid the minimum payment/forever-in-debt cycle. The Center for Responsible Lending says to watch out for the following warning signs:
- Large fees
- Penalties for early payment
- Inflated interest rates
- Adjustable interest rates
Be sure to thoroughly vet all loan offers before signing. Know what you’re getting into ahead of time.
How to Use Credit as a Positive Tool
Not all debt is bad debt. In fact, credit can be a very positive tool if it’s used in the right way. A low-interest consolidation loan, for instance, could save you a lot of money in interest payments and help get you out of debt much quicker than if you continue making your minimum credit card payments. Even a credit card, if used properly, can help you improve your credit score.
The key is to learn how to use credit responsibly. Don’t take on debt unless you have a positive reason for doing so and a solid plan for paying it back.