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Being in debt is a losing
play in today's economic world. Fortunately,
the average credit card rate today versus a
year ago is one percent less, 17.03%,
according to the latest bankrate.com survey,
but that slight decrease is not enough to spur
consumer relief.
In fact, recent reports indicate that $715
million dollars will be charged off from
consumer debt for 1996. Who's fault is all
this debt? It's difficult to assess blame.
Going into debt has been a socially accepted
practice for the past 30 years and was even
considered a wise strategy when inflation was
pushing prices higher. "Buy now---pay later"
was the motto. The lenders behind all this
debt...are they worried? Perhaps, yet the
preapproved offers still flourish.
What can you do if you think you've assumed
too much debt? There is one way to find out.
Using the example in the Debt Limit Worksheet
below, let's determine how much debt, as a
percentage of your income, you can afford, and
limit your borrowing to that amount. Note:
This does not include groceries, utility
bills, etc.
|
Loan/Credit Line
Monthly Payment |
|
VISA |
$335.00 |
|
Gas Card |
89.00 |
|
Department Store
Card |
129.00 |
|
Auto Loan |
279.00 |
|
Mortgage (P&I only) |
826.00 |
|
Student Loan |
50.00 |
|
Total Monthly
Payments |
1,708.00 |
|
Gross Monthly
Income* |
2,416.00 |
|
Divide payments by
income |
71% |
|
*Based
on annual salary of $29,000 |
It's no doubt that lenders and credit card
issuers make it easy for you to borrow money
or establish high credit lines. Unfortunately,
the end result for many consumers is that
they're over their heads in debt. If you pay
for everyday necessities, such as food, rent
and gasoline with a credit card or if you
frequently receive overdue notices from
creditors, you may be overextended.
Here are few other tell-tale signs that
you've assumed too much debt.
- You only pay the
minimum payments on your debt, and you never
pay off the principal owed.
- You have reached the
limits on most or all of your credit cards
and credit lines.
- You pay so much in
interest on your debts that your payments
rarely touch your principal balance.
- You apply for credit
but are denied because of negative blemishes
on your credit report.
- You do not know how
much you owe or what you spend on interest.
If you find that your credit card bills are
out of hand, the worst thing you can do is
ignore them. Most creditors would rather help
you work out a debt repayment schedule than
send a collection agency after you or take
away your assets.
Consider the Consumer Credit Counseling
Service (CCCS) 800-577-CCCS, which offers its
service free of charge or for a small fee.
Under the guidance of CCCS, your counselor
will help you work out a realistic budget and
debt repayment plan and work with your
creditors. The goal: To ensure that you pay
back your debts over time. |
