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Everything About Debt & Debt Financing
Debt Financing
Debt
MORE INFORMATION ON DEBT FINANCING
ADVANTAGES?
There aren't advantages of being in debt, however, there are some in the topic of debt financing, which is the borrowed money that is paid back with interest within a negotiated time frame.
In the context of borrowing money for a business, these advantages include:
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- maintaining ownership and having complete control of your business
- interest fees and the charges on a business loan is tax-deductible
- you as the borrower is under no obligation to share your business profits.
Due to credit cards also being considered as debt financing, we can talk about the positive outcomes a credit card supplies a consumer. Credit cards allow people to:
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- keep their options open for a purchase that may be more costly
- safer to carry around in comparison to cash
- consumers can be rewarded if they play their card right
- credit cards do the record-keeping, meaning consumers will be able to track their expenses.
Common disadvantages of debt financing include,
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- repayments plus interest added with the inability to pay in the agreed time frame
- will affect your credit rating if you do not pay on time, which may affect chances on a future loan
- unless you have a guaranteed plan on paying back your loan, you are in risk of potential bankruptcy
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DISADVANTAGES?
Additionally, since banks are mostly conservative when lending out money, it will be difficult to secure debt finance for new developing businesses.
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Using a credit card is also considered debt financing.
When the client of a credit card company purchases an item or service using the card system, it results with debt.
If the money spent by the consumer is not paid back, the debt accumulates and increases due to the interest and eventually penalties.
HOW TO FIND THE BEST CAR LOAN FOR YOUR FUTURE SELF
So there isn't a person that can point at a car loan and declare it the best of them all, but there are ways you can minimise your options and find the best car loan based on you, your financial situation and your needs.
STEP 1
SHOP AROUND!
Use comparison websites like Canstar or RateCity to quickly compare and contrast all the different car loan products from dozens of lenders.
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You can use a filtering system on the website to narrow down your options to your preferred interest rates, upfront fees and more.
Using websites like these can help you greatly in working out what car loans would be best for you.
GETTING PROFESSIONAL HELP!
Don't be afraid to ask for help! Because car loans are quite difficult to understand, you may want to ask for professional help to assist and support you whilst you find something that's great for you and your wallet.
You can't find the true value of a car loan by just looking at the interest rates and fees, you need to look at the features of the car. This is also where professional help can be handy.
STEP 2
STEP 3
BECOMING A MORE CREDIT-WORTHY BORROWER
Lenders are more fond of reliable people. If a lender is more assured in your ability to repay a loan on time, they are likely to give you loans on favourable terms.
Ways to seem more reliable include having a good credit record (a record of borrower's responsible repayment of debt), a stable and reliable income, high savings and a big deposit.
MORE INFORMATION ON DEBT
what you should do to avoid too much credit card debt
HOW TO PREVENT DEBT?
So, with all the obvious negatives about being in debt, how can we prevent getting into it?
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Well, the best way to do this is to be proactive about your finances and money management.
This means to control the situation before it actually occurs, to secure a stable financial plan, to steer clear from the foolish impulse buys that bring short term satisfaction to you but a long-term effect on your bank account, and to know what you owe and your limits.
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Don't fall into temptation!! Avoid spending money on goods or services that cost large amounts and will take a longer time for you to pay back.
Yes, credit cards are very tempting, but just think about the future and ask yourself, "Could I pay this back?".
For companies or individuals that are debt financing, it could work out great for you but know. your. limits!
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For more information about managing your finances to prevent debt, read down below!
MANAGING YOUR FINANCE
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START YOUNG, YOUR FUTURE SELF WILL THANK YOU
Managing your finance is an extremely important factor in preventing and getting out of debt.
Some essential steps to managing your finance include:
- Creating a BUDGET
- Understanding
- Removing unnecessary expenses
- Creating and EMERGENCY FUND
- Superannuation
- Finding a tracking METHOD for you
tap button for more information down below
WHAT TO DO WHEN YOU'RE IN DEBT?!
Yes, debt is going to be an extremely stressful part of your life, and it is essential to know what to when you're in it. These things are important to keep a note of when you deal with the stressful time.
STEP 1
KNOW WHAT YOU OWE!
No matter how small the debt, know what you owe and whom you owe it to. Make a list! The list can include your debts, your total amount of debts, monthly payment and the due date. Getting organised can really help you with everything! You got this!
STEP 2
PAY YOUR BILLS ON TIME EACH MONTH
Late payments make it more difficult to pay off your debt as you will also need to pay a late fee. To add on to the pressure, if you miss 2 payments consecutively, your interest rate and finance charges will increase!
STEP 3
MAKE AT LEAST THE MINIMUM PAYMENT
If you are struggling to pay or you can't afford it, at least try to make the minimum payment. This doesn't help with paying off your debt, but it does keep your debt from accumulating and also keeps your account standing.
STEP 4
DECIDING WHICH DEBTS TO PAY OFF FIRST
Often times paying your credit card debt first is the best strategy as their interest rates are higher than other debts. Use your debt list to rank and prioritise your debts!
STEP 7
USE A MONTHLY BUDGET!
Keeping a budget allows you to ensure you have enough money for living expenses. You should also plan far enough ahead. This allows you to take early action in the case where you cannot pay your bills for this month or the following month. It can also help you use any spare money left to pay your debt faster.
STEP 5
PAY OFF COLLECTIONS AND CHARGE-OFFS
When times get tougher, only pay off your debt as much as you can afford. Don't sacrifice your good-standing accounts for those that have already affected your credit rating.
STEP 6
REMEMBER TO MAKE AN EMERGENCY FUND!
Creating even a small emergency fund that will cover small expenses that occasionally come up is essential. Even if you start off with a small amount, you can work your way up.
STEP 8
RECOGNISE THE SIGNS WHEN YOU NEED HELP!!
If you continue to find it difficult to pay off your debt and other bills each month, you should think of getting help from a debt relief company like credit counselling agencies. Some other options for debt relief include debt consolidation, debt settlement and bankruptcy. Each has its own advantages and disadvantages so weigh them out carefully.
MANAGING YOUR FINANCES
START YOUNG, YOUR FUTURE SELF WILL THANK YOU
Managing your finance is an extremely important factor in preventing and getting out of debt. Here are some fundamental steps to help you manage your money the best way possible.
STEP 1
STEP 2
CREATING A BUDGET!
Creating a budget is ESSENTIAL in managing your finances well. It is the first step in paying off debt, enables you to save for future expenses and helps you see your financial situation clearly. It may take a while but it sure will pay off in the end!
UNDERSTANDING
Understanding your income and expenses is the second step to managing your finances well. Tracking your expenses will allow you to see the whole picture and will help you manage your expenses going forward. Now, subtract your expenses from your income. Do you have a negative number? If so, actions in reducing your expenses need to be made. If you got a positive number, GOOD JOB! You should now increase your debt payments or savings! You're on the right track.
STEP 3
STEP 4
SAVE SOME MONEY FOR RETIREMENT (SUPERANNUATION)
Yes, it is very far away, but once you start working and earn more than $450 a month (before tax), your employer will most probably have to pay at least 9.5% of your pay into your complying superannuation fund. Superannuation is a fund gradually building while you are working to ensure you have a comfortable retirement. This fund, however, cannot be accessed until you reach a certain age and in most cases, retire.
REMOVE UNNECESSARY EXPENSES
Do you need it for your survival? If not, try removing it from your expenses. Love playing video games or following the latest trends in clothes? Maybe, just maybe, try not to use your money on it. It can be hard, but removing unnecessary daily expenses can save you heaps of money! Every cent can add up to hundreds!
STEP 5
USE PERSONAL FINANCE APPS
Finances are going to always be complicated. Don't you just wish there was something that could help you get more organised and just uncomplicate things? Well, I got you! Use personal finance apps such as Mint (highly recommended), You Need A Budget (recommended for debt payoff) or Prism (recommended for bill payment) to help you! There are many other apps out there that can help you manage your finances and take the weight off your shoulders!
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