Dealing with debt is a challenge that most of us will face. We’re wired to feel guilt when we owe money. Not all debt is bad, however. For some, debt can be a way to climb to the next level of building or growing wealth. Student loan debt for example, is a way to finance further education and training that can lead to a higher paying job. A mortgage can allow for possible growth as a real estate investment.
But debt, if not properly managed, can also lead to difficult financial positions. Consumer debt such as personal loans and credit card debt can be a hindrance on your ability to save and if left unchecked, may become overwhelming.
Types of Debt
Understanding the types of debt that exist is a critical part of managing your debt. There are different types of debt such as secured debt versus unsecured. There are also differences in the way you pay your debt. Debt can be revolving or installment. Finally, understanding the difference between good debt and bad debt can help you manage and prioritize any potential repayment strategy.
Student Loan Debt
Many of us are familiar with this type of debt. Higher education is expensive and many people have found it impossible to come out of school without at least some debt. Next to a home purchase, this is where some of the largest debt balances are found. Managing student loans by paying attention to the types of repayment plans and the interest rate can be critical to making progress on your loans.
Credit Card Debt
Credit card debt is the most common and toxic debt a person can have. With high interest rates and burdensome fees, credit card debt is a slippery slope that can be overwhelming. Understanding borrowing alternatives and making sure you have a plan to pay down this type of debt can go a long way to making sure your financial future is secure.
Managing Debt as a Couple
It may be that you have incurred debt as a couple or perhaps you brought debt from your earlier life. Either way, managing debt with a partner has its own set of advantages and challenges. You may find that you and your partner have different views of debt. You may also find that you are aligned with one another and can combine resources to manage your debt effectively.
How Debt Impacts your Credit Score
All debt has an impact on your financial picture. One of the ways that your financial health is determined is by looking at your credit score. Understanding what goes into your score and how you can increase it is critical as you work to improve your financial condition.
Managing your debt, while not always easy, can have a huge and lasting impact on your ability to reach your financial goals.
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