There are times when you need extra money and one of the ways to get it is
to borrow it borrowing can come in the form of loans
from the bank friends or even purchasing things on credit
borrowing money may help you meet your immediate financial needs
but it can be hurtful to your financial life at the end of the day
and as you may or may not know not all forms of debt have the same effect in
your financial life however if you want to achieve financial
success in your life then you must become aware of the most harmful debts
to have which is why in this video i will share
with you the four forms of debt that you must avoid at all costs
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life-changing content doubt number one credit card debt let's face it
you knew credit cards would be on this list having a credit card makes it easy
for you to buy the things that you want to buy
even if you don't have the money for them in the moment sadly paying with a
credit card has become so easy that most people do not know when they've spent
more than they can afford to in short credit cards are convenient to
use but if you are not careful you may end up in
serious debt credit card debts usually come with high interest rates that can
be as high as 27 which is why they can be so debilitating
to your financial position these high interest rates mean that if
you have a credit card debt of a thousand dollars and you fail to pay on
time you may end up paying an extra 270
dollars in interest this amount can be greater as the
interest will compound over time if you want to avoid credit card debts
you have to look out for some of the common causes of credit card debts and
eliminate them one of the first reasons why people have
credit card debt is because they do not have a budget
some people think a budget is not necessary or it is a complete waste of
time however a budget is an important tool
that you must use if you want to avoid debt having a budget makes it easy for
you to find out if you're spending too much money on a particular spending
category every month and it also helps you effectively plan
your spending at the beginning of every month
and allocate a specific amount for different needs and thereby reduce
unnecessary spending for example buying a cup of coffee every
day makes you spend about 30 to 150 every month the price for a cup
of coffee is about one to five dollars however if
you decide to make your coffee at home it will cost you about 16 to 18 cents
per cup that is just about six dollars every
month if you compare the price of making your coffee and buying outside
you'll realize that you can save a lot of money making your coffee
having a budget is one of the things that will help you think like this and
eliminate unnecessary spending another way to
avoid credit card debt is to avoid impulsive buying
you can easily fall into the trap of buying many things that you do not need
using a credit card because you're not holding cash you may
not feel like you're spending too much money because you're paying with your
card eliminate this by buying things with a
list and if possible do away with your credit card
spend your money and only buy things that you can afford
sometimes it may mean shopping for items that are cheaper like buying a similar
product from a lesser brand finally if you want to eliminate credit
card debt then you must do everything you can to pay back your balance
on time when you delay paying your credit card debts
the amount that you owe increases because of the accumulation
of interest debt number two payday loan debt another form of debt you must
avoid at all costs are payday loans a lot of financial institutions that
offer payday loans will tell you the good things about this form of debt
and try and entice you to take them on but they are only telling one side of
the story a payday loan is one of the loans with
the highest interest rates due to its short repayment period in
effect a payday loan is a short-term emergency loan that is usually due back
in less than a month from when you take it out and almost
always is accompanied by a high interest rate
when it comes to borrowing payday loans can offer you a loan that is as much as
50 of your expected salary and most people
take a payday loan because they have an emergency
that cannot wait until they collect their salary these loans are usually
deducted immediately from your next paycheck
together with the interest one of the reasons why many people like the payday
loan is because of its convenience when you apply for the loan and your
application is approved you can be paid within minutes
this probably makes it sound like a fair deal for people who need emergency funds
but it isn't the interest rate on this type
of loan is high and may have more disadvantages and benefits for example
you may be charged as high as twenty dollars for every hundred dollars you
get is a payday loan remember that you were expected to repay
this high interest rate in a short period like two weeks
the interest continues to increase and accumulate for some people who
fail to pay back within the given period another disadvantage of this loan is
that it can make you financially unstable
people who take payday loans have to keep doing it to continue to meet up
with their financial needs imagine taking out half of your salary
before the payday is alone that means you'll have a little amount
left to spend you may be forced to apply for another
loan and it keeps you in an endless cycle of debt
a payday loan may be easy to obtain but they may not be the best solution for
you and that is why you must avoid them at all costs
you are much better off asking a friend or family member to spot you some
cash in the short term or even opening a line of credit as this will come with a
lower or zero interest and will save you from risking falling
into the payday loan debt spiral debt number three auto loan debt another
form of debt that many people battle with is auto loan debt auto loan
debt can easily drive you into debt with a high interest
payment however i'm going to share with you some ways to avoid this type of debt
in this video before you buy a car you need to make a
careful plan don't buy a car until you are sure
you have a plan to pay it back if you do not have any plan in place
create one immediately or consider passing on paying for your car on credit
now i know it feels good to get into your car and be welcomed by that new car
smell especially if it is your dream car but
you must not enter into debt because you want to buy a new car
you should also consider buying a car that you can afford or a used car
if you want to avoid getting it to dead altogether used cars are cheaper
and will still serve the same purpose as a new car
the basic function of a car is to move you from one place to another
and even a used car will perform that function another reason why people take
a loan to buy cars that they cannot afford is that they do not have a budget
for it just like you have a budget for your
groceries and other items you also need to have a budget for your car
know how much you are willing to pay for a car before you take a car loan
you can easily research online to understand how car costs
equate to monthly payments and when you get to the dealer don't forget to
bargain before making the purchase the dealer wants to charge you as much
as possible to make more profit and increase their own commissions
if you bargain well you may be able to get them to reduce about 500
to a thousand dollars from the price also do not prolong your debt repayment
try to pay off any auto loans as soon as possible taking a longer time to pay may
allow you to pay a smaller amount each time but
if you pay your loan in the shortest time possible you will pay
lesser amount as interest putting more cash down to making the down payment
will also reduce the time it will take you to pay back as well as the amount of
interest you will pay before you get yourself into any auto
loan debt you have to understand that the actual cost of a car is not just the
amount that you spend on buying it there are also daily costs such as
fueling maintenance and repairs most people do not put this into
consideration so after buying their car they still need to spend a lot of money
on it and then find it difficult to pay back their loan
debt number four student debt student debt
is another form of debt that you must avoid at all costs the majority of
graduates come out of school with debt and some do not have a solid plan for
paying it back coming out of college with debt is not a
good thing especially when you have a degree that offers
little draw prospects paying back the debt in this case becomes all the more
difficult and the best thing to do is to avoid it when you come out of college
with debts it can affect you financially in many ways
it can hinder your ability to save for future purchases like a house or a car
or even starting investing in your retirement moreover having thousands of
dollars worth of debt can be mentally draining
as it hangs over you like a dark cloud luckily there are ways to reduce or
avoid student debt altogether which i want to get into now
the first way to avoid student debt is to have a plan before you ever step foot
in college you can get a job during high school and
start saving some of the money for school
this can greatly reduce the burden of the cost when you finally secure your
admission another thing you should do is to consider schools that are not too
expensive private universities are usually
expensive so you can consider a state school that offers the same degree that
you want to study another thing you can do to reduce the
cost of schooling and avoid debt is to cut your living expenses as a student
you have to endure the hardship now if you want to avoid debt
if it is possible for you to go to school living at home then do it
it will save you money and get you light years ahead when you graduate
however if that option is not available to you you can also consider getting a
roommate you and your roommate could split the
rent and you will pay less than when you are renting the apartment alone
in short if you want to achieve financial success you must learn to
avoid these critical forms of debt at all costs thanks for watching
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