Debt can come in many forms. Debt can consist of payments due for auto loans, credit cards, mortgages, payday loans, student loans, and even borrowing from your retirement accounts. Debt management may seem like a chore. However, keeping track of what you owe can help you build a solid financial future and eliminate future financial stressors. Read on to discover the four most common types of debt.
It's no surprise that credit cards top this list. You may see credit card offers on television, in your mailbox, and even in your emails. It's essential to monitor your credit card usage to ensure you use it responsibly and not for every purchase you need to make. A good habit is to pay cash for any purchases under $20.
See my feature in 10 Signs Your Spending is Out of Control.
For most individuals, transportation is a need. You need it to get to work, go grocery shopping, and ensure that you have a reliable means of transportation. As a result, you may require an auto loan if you don't have the cash on hand to pay for your new or used car in full. To control your auto loan debt, it is essential to consider the loan's total cost and evaluate your loan options. If you are a member of a credit union, you may be able to get a better deal than the dealership is offering.
Mortgages typically are between 15 and 30 years. It's a debt that never seems to go away. However, you can reduce the time you have to pay for a mortgage by paying additional towards the principal. I lowered my 30-year mortgage to eight and a half years by adding additional payments towards the principal every month. This method saved my family over $140,000 in interest.
Here's a great book that can help you on your credit journey. Your Score: An Insider's Secrets to Understanding, Controlling, and Protecting Your Credit Score (Ad)
Providing that you want to increase your income or move on to the next step in your career, you may need to take out a student loan. However, other options can help you avoid student loan debt. You can find scholarships or grants and use employer tuition reimbursement to fund your education. If you still require a student loan, federal student loans are preferred over private student loans. Federal student loans give you a better interest rate, and loan forgiveness may be available if you work in public service for ten years.