Three Tips for Keeping Debt Manageable

Let’s say you’ve just finished paying off a debt consolidation loan. You’re free and clear. Your house is yours, bought and paid for, as is your car, and your credit is spotless. Now… let’s say that you’ve been hoping to buy a second car, or a boat, or make some improvements on your home. Whatever the case may be, the point is that you’re probably going to need a loan for that big purchase.

So, how do you attain what you’re after without having to repeat that tedious and frustrating cycle of debt and bad credit all over again?

Below, we’ll offer three tips to keeping your debts from becoming unmanageable again, but to be frank, it really does come down to practicing common sense.

1. Don’t live beyond your means

If you’re taking out another loan, make absolutely sure that you can guarantee that you’ll be able to make the payments on time. Try to get a fixed interest rate, not an adjustable rate. Try to negotiate an easy payment plan. Most importantly, be reasonable, don’t fall for the notion that a loan is free money. If you’ve had to square debts through a consolidation program before, than you know better than anyone that a loan is not free money. So, going back to the example of buying a boat, do you really need a thirty foot yacht? Or will a modestly sized, and more importantly, modestly priced houseboat provide as much luxury as you need?

2. Don’t abuse your credit cards

The best way to build credit is to make small purchases with your credit cards now and then, and pay your credit card bills off on time. The best way to destroy your credit is to use your credit card frivolously. When you’re making luxury purchases, such as going out to eat, going to the movies, buying a new TV, use cash. Using cash, you’re more aware of how much you’re spending, and you’re only tempted to really go all out and treat yourself when you can afford to go all out. Using a credit card just for groceries or gas, well, you don’t really “treat yourself” to an extra gallon of unleaded, so, despite their promise of being disposable income for the shop-a-holic, the best way to use your credit card is on necessities alone, and not on luxuries.

3. Negotiate and renegotiate any loan terms

Often, when we get approved for loans, we’re so excited about buying a new car or moving into our very own home, that we completely forget to carefully think it through. When taking out a loan, you need to put aside your feelings, your excitement, and put on your poker face. You want the best payment plan and the lowest interest rate you can get, and that’s the bottom line. If you’ve cleared your credit up with a debt consolidation program, negotiating great loan terms might even be easier done than said.