No 'one-size-fits-all' recommendation is possible when considering the right amount of debt to assume. But that doesn't mean there are no good guidelines at all.
Credit card companies risk a lot to extend as much credit as they believe they will receive payment on. But they don't extend credit blindly. They do their homework, checking current interest rates, credit history, and default rates before extending credit. Borrowers can learn from their methods.
When you are thinking about applying for more credit, think seriously about it and honestly consider if there is any possibility that you will be unable to repay the debt. Never think of bankruptcy or defaulting on the debt as an option. That type of thinking has disastrous results.
You can factor in expected increases in income - banks and other business do - but you should be very sure you're actually going to receive it. A promised raise or hoped for income from a stock sale is far from guaranteed money.
Look at current interest rates and make a prediction about where they are headed, businesses do. That's a very difficult thing to be confident about, but general trends are not random. Look at bonds, futures and other indicators. If 6% bond option prices are going down, many pros are betting interest rates will rise to above that in the future. These represent the bets of professionals about the future direction of inflation and interest rates.
Look at your own credit history the same way a bank would. Try to see it from their perspective. Would you loan yourself $10,000 at 7% for 48 months? Avoid rationalizing late payments or defaults. You may have had a legitimate reason, or you may not yet have developed the resources (inner and financial) to repay all your debts on time.
Make an honest assessment of your income and expenditures. You may really want a new car, but can your budget handle it? Be realistic as to whether you can handle a new car payment and still meet you other monthly financial obligations.
Ultimately the decision is yours and no one can make it for you. You have to personally weigh the pros and cons of "buy now pay later" and decide if spending more in the long run and creating another monthly bill is better than waiting until you can pay cash.
About the Author:
Never able to pay off credit card bill at the end of the month? Learn how to get your debt paid off faster - starting right now - at the Debtopedia website. Visit http://www.debtopedia.com to get your free copy of my special report "Secrets of Credit Card Debt" now.
No comments:
Post a Comment