Three Questions about Debt You May Be Embarrassed to Ask

There are a few questions about money that most of modern-day individuals admitted feeling embarrassed to ask. No one likes the idea of informing others, especially family and friends; they are suffering from financial hardships.

It is much better to bury the head in the sand, right? No! Mentioned below are three common questions you need to ask regarding debt, along with answers that shed a tad light on the topic. Please check them out now.

1.      When to Declare Bankruptcy?

The experts working for the best debt management companies said that the word ‘bankruptcy’ strikes terror in almost everyone’s heart. It is often construed as destitution, failure, or the termination of the line. But, bankruptcy is not that bad.

Several wealthy and well-known people declared bankruptcy, and they are doing absolutely fine. It simply offers a way to restructure the debts and collaborate with the creditors while getting protection to the extent that would not leave one penniless.

So when to declare bankruptcy? Well, it varies. If you can make negligible payments on the credit cards and are relying on other cards to make the payments, that is a major warning sign. If you live on paychecks, cannot pay the bills, have zero savings, and may certainly get evicted, you are in danger.

A simple test would be to add the assets and compare them to the money you owe. If what you owe is more and creditors are calling you up every day, you should declare bankruptcy.

2.      How to Handle Huge Credit Card Debt?

Credit card debt is crippling. Unfortunately, several individuals take on multiple credit cards to cover the costs, and before they can realize, they are submerged in monthly payments that they cannot make. There are a few options to handle credit card debt.

First, you can transfer the debt to other cards or loans with comparatively lower interest rates. Many credit cards provide zero interest on the balance transfers with at times no fee or a tiny fee – 2% of the total balance.

Second, you can cut costs to make the payments. Cancel the fashion magazine subscriptions. Stop eating out. Get rid of the cable channels. Stay away from online shopping. Finally, implement the snowball strategy. Apply more money to the credit card with the smallest balance and make minimum payments to the others.

3.      What is the Difference BetweenGood and Bad Debt?

Good debt is anything that generates value down the road. You can consider purchasing a home with good debt since the investment will increase in value and lead ultimately to more money. Another example is a student loan, which is an investment in yourself and your capacity to earn in the future.

Bad debt does not generate any value. It is money spent on disposable items or items that bring no substantial financial gain. For example, going on a cloth shopping spree is bad debt. You may think buying a suit for work is good debt, but it is bad debt if it does not lead to financial payoff. Car loans are also bad debt since cars denigrate in value.

Asking the questions specified above, whether to people who have profound knowledge regarding finances or to the qualified and experienced debt management consultants, help you get rid of your monetary obligations within a short period. Do not be embarrassed. You are not the first person in this world to drown in debt. You share the space with a larger segment of the population.