It is advised that one should learn to save and manage their funds wisely. However, in today’s time when loans are credit cards are easily available, people of all ages more particularly young people are falling into a debt trap. People of young age fancy credit cards, they feel that having a credit card is like a status symbol because it gives them the ease of payment at any time but what they forget is the bill they need to pay later. However, there are a lot of disadvantages of credit cards as listed below:
1. Credit cards come with a lot of additional charges like interest rates, service charges etc. in exchange for the credit offered by them. People forget to read these terms before purchasing a credit card.
2. Credit cards often tempt people to spend more even if they do not have money today as they have the comfort of paying back later.
3. People tend to purchase more credit cards so as to extend their earnings and later end up piling huge sums of debt. Delay in meeting your credit card payments affect your credit score and restrict your ability to get further credit at good rates. One has to increasingly borrow at higher rates to meet earlier loan or credit card payments. This goes on until a person is in a complete trap and permanently damages its credit record.
So what can be done to avoid getting into a debt trap? Following are some of the ways you can avoid a debt trap:
Cut back on your spending:
• Always try to cut back on your spending and rethink before you buy any items other than your basic needs.
• People at a young age are very keen on electronic gadgets and wish to spend on the latest in town. But what you do not realize is these gadgets cost quite a lot on your pockets, squeezing your bank accounts to an extent that you would not be able to pay up for your education Set debt limits
• Decide how much you can afford to be in debt. Then, make sure that your total debt is below this amount
• You may also want to set a limit on how much money out of each paycheck you are willing to spend on debts. Having this sort of limit can be very useful in ensuring that you do not overextend your credit Shop carefully for debts
• If you do need a loan, be sure to do your research well. Always understand how much you will pay your loan in interest and look for the lowest interest rates and the most affordable debt you can find. This will ensure that you do not end up overspending on interest rates
• Once a year, check to make sure that you are still getting the best interest rates and best loan deals possible. You can easily do so on the Antworks Money site. Don’t give into temptation
• Once you show that you can handle some debt, many companies will be eager to offer you more credit. Companies may start sending you credit card offers and your lenders may offer you additional credit products
• While it may be tempting to take out lots of new debt, you need to be wary of doing so. Only take out a loan or credit service when you really need to Automatically have the money go towards your bills
• Many banks and employers will allow you to have some money automatically deducted from your paycheck
• This can be a great way to ensure that your bills get paid promptly. Plus, since you won’t even see the money, you are less likely to miss it
At Antworks Money, we encourage our users to follow a disciplined approach while borrowing and avoid falling into a debt trap by following the aforementioned rules.