Running up too much debt can foil the best financial plans, so it pays to find out where you stand before you go too far.
Without debt, it would be tough to buy a house or your first car. Not many of us can rack up $100,000, $200,000, or more to buy a house free and clear. With debt, you can definitely have too much of a good thing. Mortgage payments, car payments, and credit card minimum payments are due every month, no matter what. If you borrow too much, you might not be able to save any money after buying food, paying taxes, and making debt payments. When things get really out of hand, you might end up borrowing money to buy food and that will simply end badly. Even if lenders are willing to loan you more money, it’s a good idea to keep your debt load under control. If you find out you’re over the edge of excessive debt, you can use common sense, discipline, and online tools to get back on track.
When you shop for a mortgage or a car loan, lenders typically check your debt to income ratio to figure out how much they’re willing to lend to you. Credit card companies, on the other hand, want you to run up balances on your credit cards. With rates as high as 21 percent, they rake in the dough when you maintain a balance. Paying only the minimum monthly payment on a credit card can take years to pay off the balance, and the interest you pay could end up being more than you borrowed in the first place.
So, what are ...