There are millions of people all over the world that are in some type of debt.  It seems like once you’re in debt, you’re in debt for a long time and it’s hard to get out.  Therefore, trying to avoid debt as much as possible is important.  Debt causes people to stress out, ruins relationships and really it just makes life a lot harder.

So, what is it that causes debt amongst so many people all over?  How do people get into debt and what is causing them to get into it?  Continue reading below if you’d like to find out.

5 Main Causes of Debt:

Home:  First of all, our home is probably going to be the most expensive thing we’ll ever buy.  This is what some people live in forever, plan to make money off of and is something you definitely can’t go without.  Although, what most people don’t realize is how much it will cost to heat and air condition a large house, how much it will take to fill it with furniture, etc.  When home searching find someone practical and reasonably priced.

Car:  Your car is another expensive thing you will run into.  Make sure you don’t get anything over the top and something you can’t afford but instead something good on gas and something with practical monthly payments.

Student loans:  An education is a must for a lot of people in this world.  Therefore good job for getting one!  Student loans is debt, but it is also a “good debt” so don’t feel bad for this, but instead slowly pay them off.  They will pay themselves off in a few years anyway!

Credit card bills:  A lot of people think that putting items on plastic is a lot easier because you can “pay later”.  Although you can pay later you still have to pay.  So, if you’re not paying your bills in full each month I think it’s safe to say you’re spending more than you should.

Overspending:  It is this simple, people spend more money than they make.  It may sound silly but it’s the truth.  If you spend within your means and don’t spend more than you make you won’t ever let debt become a problem!

There are several reasons people are in debt, but I think it’s safe to say these are the top 5 reasons for it and where they come from.  Hold on to your money, invest it, plan for retirement, save for an emergency and never spend more than you make!

When the economy is rough, so it our financial business.  Whether we’re not making what we used to, go laid off or are in the process of looking for a job, it is tough to pay the bills.  Not to mention, when it rains it pours.  It seems like once something goes bad or needs to be fixed, something else goes wrong.  If you’re finding yourself in this situation, you’re not alone.

Although, unfortunately when we come across a time like this it is hard to pay our credit card bills or bills we have for our home.  If you don’t think you will be able to come up with a credit card payment this month, this is what may happen as a consequence:

What Would Happen if I Didn’t Pay my Credit Card Bill?:

Score drops:  First of all, your score would most likely drop simply because you are no longer paying your bills on time.  This is one thing that affects your credit score.  So when you don’t pay your bills on time, it will lower.  The more you do it the lower it will get.

Fee:  You will most likely be charged a late fee from the credit card company.  It’s not for sure how much it would cost, but I would look it up in the fine print about your credit card.  It is important to pay it each month just to avoid the late fee, otherwise your bill will be even higher.

Court:  If you don’t pay your credit card and this happens multiple times you could be brought to court over it.  You borrowed money, the banks were nice enough to lend it to you and therefore they want it back.

Wages:  If you’re not paying your bills and it’s getting out of control they could garnish your wages.  Meaning they could be taking chunks out of your paycheck so that you’re forced to pay them.  You don’t want to get to this point, so make sure you only buy what you need each month so that you have left over money to pay your bills.

When you don’t pay your credit card bills there can be several consequences.  These are probably the most common and can really become a problem if you let this happen over and over.  If you miss it once it’s not too big of a deal, just pay the late fee, but don’t let it happen more than that!

If you’ve had a credit card for 5 months or perhaps 4 years and you’re eager to find out what score is, there are a few ways you can find out.  A credit score is what determines what kind of loan or rate we’re going to get, what we may get approved for in the future and can really have an impact on our financial business. 

It is important to have a good credit score for many reasons.  If you don’t you won’t be lent money, you will get declined for a lot of things and it can really hurt you in the long run if you are looking for something like a house or a new car.  To find out what your credit score means, click the link. 

How Can I Check my Credit Score?:

If you’re looking for a way to check your credit score for free I highly recommend the website CreditKarma.  They are great, give you an update each month, show you what your debt to income ratio is, show you where all your debt is, where you rank amongst everyone in the United States, age group, in your state and they also show you how your credit score was determined. 

A lot of people wonder why there score may be staying the same, is so high or is so low.  This website gives you a clear idea as to why your credit score is the number that it is, gives you updates to keep you updated and keeping track, and it can also remind you of how much debt you have which can be very helpful. 

It is a great website, is very simple to sign up and best of all, it is free!  Why pay to get a credit check each year when you can get one each month for free?

To get a good rate on a loan, or to get a loan at all you most likely need a somewhat good credit score.  Credit scores are determined by a few things like whether or not you pay your credit card bills, if you pay them on time, how many credit card accounts you have open and a few other things.

So, what exactly is considered a good credit score from a bad one?  Continue reading below to see where you stand with your credit score.

Credit Score Range:

Excellent:  If you have a credit score anywhere in the 800’s your score couldn’t be better.  You’ll most likely get the best loans, rates and everything else in between.

Great:  If your score ranges in the 700’s you’re doing great!  The mid to lower 700’s are the most common scores among people.  So you will want to stay within the 700’s or higher.

Good:  You are still considered to have a good credit score if you’re anywhere from 675-700.  Although, once you start dropping so will your rating of good to bad.

OK:  If you have an OK credit score you’re most likely between 674-620.  Your score isn’t horrible, but if you drop below 500 it will be getting pretty close!

Bad:  Your score is no longer considered OK or good if you drop below 620-600.  You can still get help from banks, but you won’t be happy with your rate most likely.

Very bad:  Anything under 600 especially 500 your rate is considered just plain awful.  You most likely don’t pay your bills on time, have too many accounts open, go over your limit, etc.  This isn’t good and you should really work on getting it up!

As you can see a credit score can range quite a bit.  You can be at the very top in the 800’s and receive many great things or you can be below 500 and have an awful score.  If you’re not happy with your score work on improving it and become more disciplined.

With everyone wanting to modify their loan this year, it’s no wonder why so many of you have questions about the process.  Whether you want to modify it because you want to save money, or maybe you lost a job, or can’t afford your loan anymore.  There are countless reasons on why you should modify your loan.  Let’s take a look today at some of the main questions that you will hear every so often.

How does the process work exactly?

A loan modification process is fairly simple.  Most people will work with the bank they are with now, or will look at other banks.  What you will do is make a change to your home loan.  Let’s say that your interest rate is 5.65%, and you can get it modified for 4.95%.  This is going to cut off thousands of dollars over the life of the loan.  Each bank is going to be different, when it comes down to fees, and such.

How do I qualify for a loan modification?

Every household in America may be qualified for a loan modification.  If you want to find out if you’re going to be eligible for it, you will want to visit the government site at MakingHomeAffordable.gov.

How do I know if I qualify?

Again, head to the site mentioned above, and fill out a little profile.  Based on your answers, you will be able to know if you’re going to be approved or not.  To be approved for that specific program, you will have to be behind on your mortgage payments, as well as have a mortgage that is worth more than your house.

Do I have to be behind in my payments to secure it?

No, not at all.  Obama’s plan was to ensure that future homeowner’s don’t go into default.  If you can barely get by today, he wants to make it easier for families to pay the bills.  Don’t feel like you’re not going to get approved, if you’re still up to date with your bills.

Who would you recommend that should do this?

I honestly say it’s up to you.  Remember that many banks are going to charge fees to re-finance, or modify your loan.  This can run upwards of $1,000 to $2,000, but if you’re going to save more than that during the life of your loan, I would do it.  It doesn’t hurt to try.

How do I start?

Try going to the government’s website again.  Here, you will be able to find where you can hire a counslor.  He/she will be more than glad to help you with your process.  You can also try asking your bank as well, to see if they can point you in the right direction.

A loan modification is beneficial to a lot of people.  It’s completely up to you on if you want to do it, or not.  Like I said above, if you can save money over the life of the loan do it.  Even if you’re struggling, it may be for you.