Debt is a huge trap that is very easy to slip into and very difficult to get out of. The perpetually available credit lines, which are designed to get you hooked as quickly as possible, are particularly dangerous.
All credit card refunds only serve to bait on that particular hook. You save three percent by buying a TV while paying 40% annual interest on your loan if you can’t pay it off on time.
Just as dangerous is the overdraft limit because it makes it too easy for you to go into the minus every month. It doesn’t take long and your salary is enough to just replenish your irrevocably negative balance and pay an annual interest of 22-30% on your half-million debt throughout the year. Yes, you calculated that it could be up to $ 100,000 a year.
In fact, you are in a time bomb because if you accidentally lose your job, the bank will detect that you are not receiving any wages and will immediately recover your entire debt in one sum.
(I wrote about overdraft limits in this article, about the dangers of credit cards here and here. If you haven’t read them yet, it’s worth reading them. Just one question: Do you know how much a $ 500,000 credit card debt is per month? ) To 30 thousand forints and your debt is not even reduced.)
What to do if you want to get rid of your debts?
The first is to try and get rid of these constantly renewing and very high interest credit card and overdraft debts.
Of course, in order to do that, you would have to balance them.
So, if you have no other option (for now), check out the banks’ personal loan offerings for redeeming loans. Among these you will find a 10% interest rate path (just one example here, but there are more, you may want to look around the market.)
Beware, that’s just that much interest if you use it to buy a loan. The loan to be redeemed may be another personal loan, credit card debt, overdraft, but not, for example, a home-based provident loan.
What do you win with such a trigger?
On the one hand, it yields 10-30% per annum, which is a profit of 50-150 thousand HUF per annum even on a 500 thousand debt. And that’s not a little money every year.
On the other hand, you can calculate predictability with your monthly repayment. (Of course beware, here too, the interest rate may rise if the underlying BUBOR interest rate rises.)
But most importantly, you can pay off your credit card debt and overdraft. When this is done, cut your credit card into small bits and immediately terminate your credit line, lest you be tempted to spend more than you earn.
Redemption will not succeed if you are already on the list of bad debtors or you do not have a minimum wage. If none exist, you may want to try refinancing your loan. This is not a big deal, check out the link above, visit the banks’ websites, or go to different bank branches and inquire about the options.
What you should pay attention to: never worry about interest, but the so-called THM. This shows the real cost of your loan. You can have an interest rate of 0% and your real cost 25% per annum. For more information, see Interest and APR
If you are reading this and are concerned
You may have already experienced on your own that credit is not the solution to your financial problems, but is directly the source of your financial problems.
If you manage to get rid of the $ 500,000 credit card debt shown in this example, you won’t spend $ 10,000 a month on interest and credit line overruns and other penalties. You’ll immediately feel like you’re earning over $ 10,000.
Getting rid of credit is a long way and we will continue, but in the meantime, you should take the first step and decide at the bottom of the pit that you will not dig further, so there will never be another month when you spend more than you earn.