Debt relief in the personal lives of many consumers has remained a major issue for some due to the fact that there are fewer improvements being seen in various areas of the economy, like employment, and as there are still many Americans who are limping along even after we have reportedly seen improvement from the recession years ago, when it comes to finding relief from various unsecured debts that consumers may have, there are certain aspects of an individual’s financial life that need to be reviewed in the hopes of helping minimize their financial strains.
Some consumers who are paying off credit card debts, personal loans, or car loans just to name a few may be in a position where they are continually spending on credit or acquiring debt due to the fact they can simply meet minimum payments. What many officials want consumers to be aware of is that minimum payments can in fact be a trap and potentially lead to a higher financial charges and potential distress if an emergency were to arise down the road. While personal debt relief in the financial lives of consumers is no simple topic, focusing here on a minimum payments can be a good starting point or a piece of the debt relief puzzle that consumers might want to explore if they are to find debt relief and stay out of debt in the future.
No matter how good or bad a consumer’s financial position may be, many individuals often feel that if they can at least make the minimum payments on their credit cards or loans they will be in a good position and essentially can afford the debts they acquire. However, something as simple as an interest rate increase or a financial setback in the form of an unexpected expense could throw these minimum payments into the category of debt that cannot be paid during a specific month. As an example, if a major repair to a home or automobile is required, consumers who have been living on the cusp of their financial means by acquiring debts and only making minimum payments could find themselves in a position where a snowball effect occurs.
It’s because minimum payments do not equal the ability of the consumer to necessarily afford their debts that it is important for consumers to review their finances and make strides to get out of debt even if they can easily meet minimum payments. While aspects of the CARD Act have been helpful in that it will allow credit card users to see a better picture of their debt situation, some consumers fail to realize that by only making minimum payments they could be meeting a substantially higher amount on their debts than they would if they paid more than was required on outstanding debts and obviously kept their debts to a minimum after finding debt relief.
It’s topics like this that accredited nonprofit credit counselors or financial planners may cover with some consumers but not every individual uses these types of resources nor do they always look at the big picture in terms of what they owe. While each consumer’s debt situation will be different and the debt relief practices implemented may not be the same among numerous consumers facing financial problems, focusing on minimum payments is one area that consumers may benefit from as only meeting this minimum requirements could lead to longer repayment timeframes, higher overall costs, and if the consumer is living from paycheck to paycheck, even a potentially affordable debt obligation could become problematic were a financial emergency to arise in the life of a consumer.