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Top 7 Long-term Consequences of Debt

Posted on February 3, 2021February 5, 2021 By Amelia No Comments on Top 7 Long-term Consequences of Debt
Top 7 Long-term Consequences of Debt
Debt

A little credit today becomes massive over an extended period. Afterward, it overwhelms and sucks the life out of you. Being indebted has adverse effects on your present and future lifestyle. For example, you must commit about 40% of your monthly income to service your loans. Here, we analyzed the top seven long-term consequences of debt.

It directly impacts your financial rating.

One of the items that affect your overall credit score is your debts and how you manage them. It contributes 30% to your final score. If you miss payment deadlines and default regularly, you should expect a poor rating. Besides, when you declare bankruptcy for any reason, it impacts your financial standing for several years. Failure to manage your debts properly will pose serious issues in the future.

It hampers your financial growth.

When debts enter the picture, hitting your financial goals might become a mirage. If your debt to income ratio is large, you channel a bigger percentage of your earnings into its servicing. Consequently, there is little left to invest in your retirement account and execute other goals. The journey gets longer than you earlier imagined. At this point, many people abandon their dream of financial independence.

It attracts exorbitant paybacks.

Loans have a reputation for triggering up to 50% payback on the initial principal. If you are not careful, you might pay 100% of the amount you borrowed. For instance, your vehicle financier may sell you a £2,000 car at 11%. When it is over, your total payback may reach £3,600. This amount is too much a consequence for jumping on debts. Due to compound interest, you pay the principal, interest, and accrued interests on the original.

Your future income services your past expenses

It hits different when the money you are yet to earn already has a destination. That time, it will only cover your loans, leaving only minimal liquidity. It becomes more frustrating when you cannot use your future earnings as you wish. Until you offset the debt, you remain chained to this vicious cycle. Meanwhile, you may have forgotten the value or enjoyment you derived from jumping on it.

You keep playing catch-up to your debts.

Nowadays, getting into a credit line is as easy as pie. Retail stores, banking firms, and external partners always have it handy. They make it possible to get what you want with minimal stress. However, loans are not free. You pay interest for the lifecycle of your debts. If the lending rate is humongous, you pay a higher interest monthly. If the duration extends to several years, you incur interests on both the principal and initial interest.

It catalyzes undue overspending.

Before you get anything you want, you need to sacrifice your money and time. The pain accompanying immediate payment might force you to rethink your purchase. However, credit instruments give the false belief that you are getting something for nothing. Unfortunately, this undue release of dopamine can lead to continuous spending of unavailable funds. Soon enough, it becomes a mighty ocean that you feel you cannot swim out from.

It affects your mental health.

A few things disturb an individual as perpetual indebtedness does. You cannot stop thinking about it. Also, it leads to worry and anxiety if it appears there is no solution in sight. Medical problems arising from this include migraine, depression, loss of appetite, ulcer, and high blood pressure. Furthermore, it can create tension between spouses, leading to arguments and shouting. If unchecked, it may lead to a breakup.

Conclusion

The top seven long-term consequences of debt highlight the dangers of continuous indebtedness. To avoid being a victim, resolve to make a change and start immediately.

Top 7 Easy Ways to Improve Your Credit Score

Posted on February 3, 2021February 5, 2021 By Amelia No Comments on Top 7 Easy Ways to Improve Your Credit Score
Top 7 Easy Ways to Improve Your Credit Score
Credit Scoring

A good credit score opens up opportunities for you. If you apply for a mortgage, you are liable to lower interest paybacks. Not only that but also for personal loans, no credit check loans and payday loans – credit institutions classify you as being financially responsible. However, if your current rating is poor, it can get better. In this post, we discuss the top 7 easy ways to improve your credit score.

Prioritize early credit payment

Strive to offset your bills on time. Delay can have a negative effect that lasts several years. Failure to cover your monthly bills is the leading cause of a bad rating. As much as possible, pay the minimum due before a month ends. It shows that you take your finances seriously. Moreover, it keeps your account safe from a collections agency. Meanwhile, if you cannot afford the minimum amount, negotiate with your credit institution.

Maintain your account even if you can do without it

A mistake people make is to close credit accounts they no longer use. Do you know your financial history counts towards your account rating? It does. Moreover, the longer the duration, the better position it puts you. Rather than cutting those cards, please keep them in a safe place. Also, it keeps your credit utilization ratio modest, at least under 30%.

Spend less than your credit card limit

When you sign up for a transaction card, it reflects and affects your total financial rating. Beyond owning the card, how you use it matters more. Furthermore, experts advise that you cap your monthly usage at 30%. For instance, if you have a spending limit of £5,000 but charge just £1,000 to it, you have a 20% utilization ratio. Another advantage of this approach is the ease of paying back.

Close joint accounts following a divorce

A divorce can be heartbreaking. However, nothing can be worse than bearing the financial burden of a broken home. When people marry newly, they create joint accounts and become co-signatories to several credit instruments. Consequently, your spouse’s credit rating will affect yours. As long as you stay together, it might be a necessary evil. After you part ways with your spouse, it makes no sense shouldering such responsibilities.

Consider credit only when it is unavoidable.

These days, getting new credit cards is relatively simple. For instance, you walk into a retail store, and they have one waiting for you – especially for a purchase worth bigger bucks. Before you append your signature, check the interest rate and repayment schedule. Meanwhile, if your current card can service the payment, use it. Also, ensure you pay for only what you need.

Keep bankruptcy at bay.

Several articles on the internet analyze the benefits and drawbacks of going through bankruptcy. One thing is clear – it plunders your credit rating quicker and longer than other factors. Worse still, it will not solve your problem. Instead, it sets you up for future challenges. For example, no mortgage or vehicle financier will give building or car loans to a victim of bankruptcy. So, downsize or find other options.

Keep your creditors close.

Many people believe creditors are personal enemies against their hard-earned cash. The truth is – they are not. On the other hand, they are businesses working tirelessly to make profits and become sustainable. Furthermore, they dedicate their time to serve you better. Therefore, change your perspective on them. If you foresee a default or financial challenge, speak to them for another alternative. Being responsible will position you as a credible customer.

Conclusion

Upgrading your financial rating is not rocket science. By following these top seven easy ways to improve your credit score, you can salvage the situation. Remember, you always have options no matter how gloomy it looks.

Top 22 Basic Banking Terms

Posted on February 3, 2021February 5, 2021 By Amelia No Comments on Top 22 Basic Banking Terms
Top 22 Basic Banking Terms
Banking

When you approach a bank, you should understand the common terminologies in use. Without the right words, you might have trouble expressing yourself fully. Also, you risk communicating wrongly with the parties involved. To prevent such, this article explains the top 22 basic banking terms.

ATM

Also called Automated Teller Machine, ATM is an electronic device that provides easy access to your funds anytime, anywhere. It works nonstop from morning to midnight until you reach your daily limit.

Automated Credit Transfer

It represents the seamless movement of funds from a second bank account into yours. Depending on the sender’s location, you may receive it on the same day.

BACS

BACS stands for Bankers Automated Clearing Service. It refers to the transfer of money into your account from a UK-based account. For instance, a client paying your earnings.

CHG

It stands for charge, which is the money you pay for services the bank renders to you. It reflects in your monthly bank statement.

CHAPS

It stands for Clearing House Automated Payment System. CHAPS is the movement of money from your account into another at a different bank.

CHQ

A shortened form of Cheque. It refers to financial transactions (both credit and debit) you make with a cheque. Also, it will reflect on your record of financial transactions.

COR

It stands for Correction, an indicator of a transactional error such as overpayment, underpayment, or account mistake.

CSH

It represents cash. Anytime you deposit money into your account physically, it reflects as “CSH” in your account statement.

CR

It refers to credit, which is money entering your account. For an individual, “credit” appears in your financial records statement when money comes in.

Credit Card

It’s a piece of customized plastic or metal that empowers its holder to buy goods without paying immediately from their account. It is a form of quick loans to fund your lifestyle.

Debit Card

It’s a tangible gateway to your checking account. You can quickly withdraw funds, make transfers, and perform other transactions with it. Moreover, it works with POS and ATM.

D/D

D/D is an Abbreviated form of Direct Debit. It is a signed command for your credit institution to pay an amount to a business or an individual at agreed intervals. The actual amount depends on the discretion of the business.

DR

It refers to debit, which is money leaving your checking account. Besides, it will reflect in your monthly financial statement.

ITL

ITL refers to International Transfer. When you move money from your UK checking account into a foreign bank account, your bank records it as “ITL”.

IMO

IMO refers to International Money Order. It refers to a protected gateway to send money overseas.

Overdraft

It is a financial instrument your credit partner provides to ensure there is no incomplete payment despite an insufficient balance.

PIN

PIN stands for Personal Identification Number. It is your secure, four-digit code to complete your banking deals from an ATM or POS.

POS

Point of Sale or POS refers to payments you make with your debit card at retail stores or mobile money outlets.

S/O or STO

S/O refers to Standing Order, which is an instruction to your credit institution to pay a fixed amount to a business at regular intervals. For instance, vehicle lenders and mobile phone lenders use it for customers who pay in installments.

SWIFT

SWIFT means Society for Worldwide International Financial Telecommunications. It represents a network of global credit institutions that facilitates faster and secured international transfer of money.

TEL

If you perform transactions from your mobile phone, it goes under “TEL.” TEL means Telephone.

TRF

Transfer. When you move funds from your account into another via the “transfer” feature, your bank records it under “TRF”.

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  • Top 7 Long-term Consequences of Debt
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