Having an emergency fund is also a big factor in addressing the vicious cycle of borrowing and consolidating and borrowing again
Dallas, TX (PRWEB) April 28, 2014
In an article published last April 25, 2014, National Debt Relief shares how long debt payment and the interest payments that comes with it affects future consumer decisions. The article titled “Could You Buy A 2004 Subaru For What Your Credit Cards Are Costing You?” points out how much interest payments add up to the point that there are items that could have been bought using them. The payments may be small on a monthly basis but swell up to a fat amount in the end.
To show just how much interest payments accumulate even for just a year, the article shares that the interest amount paid for a $30,000 debt with 19% interest rate is equivalent to the purchase amount of a second hand 2004 Subaru WRX or a 2004 Ford Focus SVT. This highlights the fact that interest payments add up to a staggering amount for just even a few months.
It underscores the importance of knowing that credit cards are best used with the objective of short term payments. This means purchasing an item and paying off that amount at the soonest possible time. Prolonging the payments over an extended period carries the interest rate that eats up at the income that could have been used for other items.
Paying off credit card debt plays a very important role in saving for the future. A few routes to take would be transferring to introductory 0% interest rates on some cards or charging the debt against a home equity loan. It is important to realize that 0% interest rates work to the benefit of the consumer if the amount is paid off during promo period. When the interest rate kicks in, the consumer is either back to the beginning or could end up in a worse situation.
The article also shares the difference between taking out a home equity loan vs home equity line of credit and how they can be used in paying off credit card debt. It points out that home equity loan is actually borrowing a specific amount on what has been paid already in the mortgage loan. Home equity line of credit on the other hand gives you access to the same amount but payments are only made on the actual principal borrowed.
Having an emergency fund is also a big factor in addressing the vicious cycle of borrowing and consolidating and borrowing again. It cushions the effect of life emergencies and allows the consumer to go through it without having to balloon up on loans by taking out new credit on top of the existing ones. Building the fund will be a key factor in getting over financial challenges while keeping tabs on existing loan payments.
The article aims to educate readers on the importance of knowing how interest payments on credit cards take a toll on current and future financial decisions. It also communicates some options on paying off credit card debt in order to save up on the high interest rate payments.
To read the rest of the article, click on this link: http://www.nationaldebtrelief.com.