NDSU Extension Service - Ramsey County


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Making Debt Work for You

Making Debt Work for You


                News stories and columns, such as this one, often focus on the negative aspects of debt.  And while it is true that American carry an average of credit card debt of $5,700 there are types of debt that can be helpful in managing your money. Very few of us could afford to purchase a home, buy a new vehicle or attend college without some sort of assistance through credit. The key is to make debt work for you, not against you.

                Home mortgages - With a home mortgage, you will need to understand what the interest rate is, and whether it is a fixed or variable rate. If your home loan rate is variable, find out how and when the changes occur. A standard mortgage term is 30 years, but there can be some variability in that. Finally, you should also understand what portion of your monthly payment is for principal, what portion is for interest, and what portion is for your escrow account. If you pay more than the minimum payment, you can choose whether the extra goes toward principal, extending your payments, or to escrow.

                Credit cards - Understand the terms of your credit cards, and be responsible with using them. Use caution with some of the offers you receive in the mail. Many credit card providers will mail you checks that you can use easily. In most cases, use of these checks is considered a cash advance, which is often at a higher interest rate than the already high rate charged on purchases.

                Car loans - When you apply for a car loan, you’ll be offered different loan terms. Though increasing the loan term usually decreases the monthly payments, try to take out the shortest car loan possible. Often long-term car loans (6 years, for instance) result in you owing more money than the car is worth at some point in your loan.


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