Student loans and credit cards are two of the most widely held types of debt. Both student loans and credit cards are a type of unsecured debt. This means there is no collateral tied to the debt like with a mortgage or car loan.
Student loan repayment options are far more flexible than those available for credit cards and also typically have lower-interest rates than credit cards.
Credit cards on the other hand, have a low minimum payment that you must make each month to keep your credit card in good standing – they may penalise you by raising interest rates if you miss even a single monthly payment. You can optionally pay more than the minimum to pay off your balance sooner.
When planning debt repayment, one of the first steps that you should take is to set aside a sum of money to prepare for emergencies. One of the biggest roadblocks to debt repayment is having to deal with unexpected expenses. Creating a budget will help you to understand where your money goes, and may allow you to identify areas you can cut back on to focus on debt payment.
For example, find ways to reduce meal costs by eating at home and looking for cheaper food options at the store, such as generic brands. You may also wish to set up a plan to make realistic repayments via monthly payment goals. Choose a sensible amount to pay towards your debt every month. This approach will keep you continually moving towards your goal of full repayment. You can also put extra money toward your debt if it is available.
The danger of pay-day loans:
Another common form of loan, pay-day loans, are short-term loans designed to help people who are a bit short of cash before payday, as the name suggests. Payday loans play a prominent role within today’s society – providing the ability to quickly borrow a small amount of money, to meet unexpected costs like replacing your boiler or repairing your car.
In theory, the borrower will use the money to tide them over and repay it as soon as they get paid. However, unfortunately it doesn’t always work like that. Many borrowers are unable to repay the full amount and as such their debt grows thanks to the fact payday loans have notoriously high interest rates. There are a number of dangers of payday loans – including high costs and risks. Borrowing from a Payday Lender may also likely have a negative impact on your ability to obtain credit in the future from more mainstream providers.