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Are You Paying Off Debt Wrong?

Even as the economy is improving, Americans debt problem is increasing. National debt is up 5% from last year, totaling about $11.74 trillion.

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Many people in debt are there because of common, avoidable financial mistakes. Some of these mistakes include:

  • Taking out pay day loans or title loans.
  • Transferring a balance to a new zero interest rate credit card, and then not paying off the balance before the higher interest begins.
  • Borrowing from 401(K).
  • Only paying one debt at a time.

To stop debt rising, try these tips:

· Prioritize payoffs based on interest rates. By paying off the credit card with higher interest rates, while making small or just minimum payments on other debts can save debtors a lot in the long run.

· Make your debt plan realistic and reward yourself for reaching financial milestones.

· Do not miss payments. Keeping up with regular monthly payments can mean the difference between negotiation for a lower interest rate with a bank or you having to default on a loan.

· Be aware of the difference between "debt management" organizations and "debt settlement" companies. Debt management can either hinder your credit scores by having you reported to credit bureaus for using their services, or if you make the payments on time through their program they can help rebuild your credit score. Debt settlement companies however have been known to make promises of getting a debtor out of debt, yet many people seem to get in more financial trouble and not have any debts settled with these companies. It is important to know how each program works and if they are a good option for you or you could find yourself in worse off shape than before.

· Student loan forgiveness is available for public employees. If you are someone who works in a public service job, you should look if you are eligible for debt forgiveness under the government program: Public Service Loan Forgiveness Program. Workers qualify for forgiveness on their remaining loan balances if they make 120 qualifying payments on the loan.

· Refinance debt to get lower interest rates. Refinancing can be an option for debtors to get out of debt, but it is only advisable if they are 100% sure they will not put their homes at risk by doing so.

Learning helpful tips to become debt free or stay on a positive financial track are important not only for those who see themselves headed toward piles of debt, but also for those who have recently gone through a bankruptcy. Following tips such as these will help you keep track of your finances so hopefully you won't find yourself with unmanageable debt in the future.

Work Cited:

You're paying off debt wrong (Yahoo Finance)

https://finance.yahoo.com/news/paying-off-debt-wrong-100119669.html

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