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Credit Education > Debt Management Help > Simple Reminders on how to attack Debts

Simple Reminders on how to attack Debts

By Janet Lacey
Published: Wednesday, December 16th, 2009

Managing debt can be interpreted in a much exaggerated way like closing down accounts to avoid future debts. Debt management may sound as if it can be based on common sense alone, but this financial technique will require experience and deep understanding of the financial world. Immediately attacking debts is the best attitude that indebted individuals can use to fully liberate themselves from the being indebted.

Debts do not compound themselves immediately, they will need some time before they fully mature through their interest rates. Time is of the essence in dealing with debts to avoid compounding it too much. Too much maturity can make borrowers indebted many folds than what they originally borrowed. Debts can also be directly correlated to the fluctuations of the borrower’s credit score and inconsistencies of their report.

Indebted persons can literally put away their credit cards to avoid more debts. But it is unadvisable for them to close their existing accounts because it will lower their current FICO score and other related credit worthiness ratings. This is the case for most old credit accounts which have been closed to avoid further debts. Old credit card accounts are those which do exist for 60 months or more. These old credit accounts bear a great weight in the credit score of the borrower because it makes up at least five years of the credit history and payment history of the individual.

Properly managing debt can only be achieved with good and honest communication between the borrower and the creditor. If the borrower will honestly tell his or her creditors about his or her current financial situation the creditor will most probably enter in a settlement agreement with the borrower.  For a creditor to approve settling would mean that the creditor will approve that the borrower can pay less from his or her original debt; given that the borrower will assure the creditor to pay off the debt. Any indebted individual will make a grave mistake if he or she will choose not to communicate with his or her creditor.

There are a lot of low interest rate companies that indebted individuals can transfer there balances to. Transferring their old balances to new accounts with lower interest rates can put borrowers in a better position in paying their debts. However, among these companies there are those that only lure clients with four to six months of low rates that would automatically jump higher after a specific period.

Debt consolidation can also be opted by those who exert efforts in managing debt. This debt management technique is best for indebted individuals with hard assets that they wish to maintain like a house or a car. Consolidating debts generally mean that all of the borrower’s debts will be paid off in a regular basis through one payment transaction. There are loaning companies that require no appraisal and no equity in doing loan consolidation. Consolidating the right debts can mean that the borrower will pay his or her creditor in a shorter period of time and with lower interest rates.

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