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In this day and age, nearly every single person be they young or old will have had debt or are currently dealing with debt. It can be a bit depressing thinking about it, however, what’s even more saddening is not many people are familiar with debt and how it works.
People are aware that debt is simply money owed and it comes from a variety of sources. Things like student loans, credit card debt, medical debt, and even debt through taxes. But not many people know how to deal with it.
Indeed these types of debts are the major ones that cut into someone’s paycheck, but much of that debt won’t simply go away from you constantly working. You need to learn the basics and know how to combat it.
Take credit card debt for example. This type of debt is easy to accumulate as people feel credit cards are a privilege. The problem is people aren’t responsible with this privilege and abuse it. It’s why on average, a household is at least over $7,000 in debt due to credit cards. To stay ahead of that debt you want to make sure you are paying the bills on time and ideally in full by the end of the month. Every month, credit card companies will send you a bill to remind you. They’ll also suggest a minimum payment amount each month, but use that only as a last resort. It often takes several months or even years to pay the balance if you go that route.
Loans go hand in hand with credit cards. There are different type of loans out there but, for the average consumer. they’ll more than likely get a loan for a car, to go to school, or for a home.
What’s also important to note is the types of credit as well. When it comes to consumer credit there are two kinds: open-end and close-end. Open-end credit is also known as revolving credit. It’s credit that can be used repeatedly and you have to pay back monthly. Credit cards are the most common types of open-end credit. Closed-end focuses on a very specific purchase which will be used for a period of time. Otherwise known as installment loans, it’s a payment that you pay in blocks (typically monthly) and includes interest charges until the full amount is paid off. Types of closed-end credit include mortgages, car loans, student loans, and payday loans.
There are all types of debt out there and each one has their own way of working. Because of this, it’s a good practice to start reading the terms and conditions of loans that you may be getting in the future. Depending on the loan certain things will be asked of you and if you default different things might happen as well. It is your responsibility to be aware of what happens in that event. Furthermore, if you don’t understand it, make sure that you talk to someone who can help you out with understanding it.