Times Of Change

Debts can eat away a major part of your paycheck each month. During the ongoing credit crunch, such a scenario isn’t desirable though. If you are in debt and if the liquidity crunch has affected you badly, you have few options to wrestle out of it. It is not necessary that you have to wait for the credit crunch to get over so that you can pay off debts at your own pace. The sooner you become debt free, the better it is. The main reason is it enables you to enjoy many financial benefits, which otherwise wouldn’t have been possible if you were deep in debt.

Borrowing with credit cards is one of the most expensive ways of availing credit. During the credit crunch, most of the credit card companies are trying their best to extract money from consumers. The facts that subprime lending has led to the credit crunch; lenders have become increasingly cautious about extending fresh credit to consumers.

If you are planning to reduce your monthly debt obligations, try to pay off debt with the debt relief program that will protect your credit score too. Not all debt help options are good for your credit rating. Debt consolidation has a positive effect on your credit score. If you are trying to pay off debt with debt settlement, your credit score reduced till the time you don’t make your payments to the creditors. The moment you start making payments to the creditors again, your credit rating improves again. The most damaging debt relief option is bankruptcy. Bankruptcy “paralyzes” you financially till the time your credit rating doesn’t improve again.

In many countries, governments are facing the same situation as the consumers. These countries are struggling to pay the high interest rate as their debts are expanding rapidly. This is gradually increasing the government spending for most of the countries. This is particularly true for countries like Germany and Britain, as a slight increase in interest rate means shelling out several thousand dollars.

Financial experts are of the opinion that during the year 2009 and 2010, United States’ outstanding debt could reach the USD$17 trillion mark or could be equal to 82% of the gross domestic product or GDP.

Contributed by: Max Harper