You’re Not in Trouble
If you have personal or business debt but are able to meet your monthly payment obligations, you are not in trouble. Creditors are happy and you sleep reasonably well at night. When you actually study your personal or business finances, however, you may find that there is no progress being made toward your long-term financial goals because so much is going out in payments each month. Further, if any disaster should strike, do you have the necessary cash back-up to weather such a storm? These are reasons why you might want to worry about debt loans and develop strategies to reduce and/or eliminate them.
Helpful Strategies
A process of eliminating debts one at a time may be a viable option for you if there is any excess cash at the end of the month. This strategy involves beginning with the smallest debt and dumping as much as possible onto it each month, making the minimum payments on all other debt obligations. As soon as that debt is eliminated, move on to the next, adding all of the amount used for debt #1 to the minimum payment on debt #2. Proceed through all of the debt in this manner until you are free. Now you actually have lots of cash surplus each month and can use it to begin progress toward your long-term financial goals. If you are an individual, you can begin a structured, progressive, and regular savings and investment program so that you have both liquid cash available for emergencies and more permanent savings for your future. If the debt was for a business, you now have the capital to begin investing in its growth and development, increasing your marketing, adding new employees, adding new inventory, etc. The possibilities are limitless when you do not have debt payments hanging over your head.
Another strategy used by both individuals and businesses is that of debt consolidation. If you want cash to begin a savings and investment program or, in the case of a business, to grow and expand that business, then you have to lower your monthly debt obligations. Getting a consolidation loan will allow a single payment which is lower than the total of your previous debt payments combined. Depending on your credit and collateral, interest rates vary greatly, but the short-term goal is to get immediate relief so that cash is freed up for other long-term purposes and goals. If the available cash can be used to establish a regular savings regimen or to increase business profits, the consolidation will have served its purpose.
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