It may not come as a surprise that Americans are living beyond their means. In fact, the average American household owes a staggering $137,000, according to the Federal Reserve. As of 2017, data from the US Census Bureau noted that the median household income in the United States amounts to $59,000. A household debt survey done in 2017 also shows that the average household in America has a credit card balance of $15,654.
Although getting out of debt can be challenging, experts believe that there are many ways to tackle debt and repair credit.This includes smart refinancing, sticking to the budget, and having an emergency fund. It also includes taking a look at high yield savings accounts to secure the future.
Refinancing and Credit Repair
Before working on getting all debts paid, it is important to find out just how much it really is. Consumers owe $1.02 trillion in credit card balances and $8.74 trillion in mortgages. The average household reportedly owes $173,995 in mortgage debt, $27,669 in auto loans, and $46,597 in student loans.
The first step in debt refinancing and credit repairs to list all forms of debt you owe. This will give you an overview of which debt should be paid off first and which ones can take the backseat for the meantime. Getting a full grasp of the situation will help you find ways to fix the problem, according to experts.
Refinancing, defined as paying off current loans with a new loan, is good way to deal with debt. It must be noted that shopping for better refinancing rates is ideal because getting a good deal will not only pay off current debt but will also make your monthly payments more affordable. The question is, will it affect your credit score? Experts note that it will but there won’t be much of a difference from your current credit score and can only lower your score by a few points. This will get better over time.
Debt Management and Freedom from Debt
Apart from refinancing, it is also ideal to decrease spending altogether. Putting money in your emergency fund is also imperative, according to experts. The amount that you will no longer use for unnecessary expenditures can go to this fund or to your debts.
Shopping for high yield savings accounts is also a smart move. This type of savings account can grow your hard earned cash over time. To get an idea which savings account is right for you, talk to a bank that you trust.
Effective debt management also means having to check your credit report regularly. The Fair Credit Reporting Act gives every American the right to a free credit report each year and it is beneficial to take advantage of it. Discrepancies are rampant and reviewing your report will make it possible for you to correct mistakes before they damage your score. Getting back on track with your finances also means making smart purchases and getting credit counselling if needed.