Debt Management Tips for First Time Borrowers

Knowing how to manage your debt is essential to a healthy financial future, but many people fall into deep debt before they even have a chance to create an effective repayment plan.  If you are applying for a credit card or loan, you need to put together a debt management plan before you borrow. Taking the time to learn about your debt agreement, shopping around for the best rate and mapping out a repayment plan before you submit your application will help you stay ahead of the game. Here are some important debt management tips for first time borrowers:

1. Create a recordkeeping system. Part of any effective debt management plan involves accurate recordkeeping. Create a filing system for your statements and a worksheet that lists all of your credit card or loan accounts, the balances, payments made and other important information. Keeping track of your debts is just as important as keeping track of your spending habits and savings account. Take some time to create an effective recordkeeping system so that it’s easier to manage your debts – no matter how many accounts you have.

2. Save some funds before you borrow. Build up a reserve before you decide to borrow so that you always have that “cushion” by your side. Use the loan or credit cards as a backup plan, and not as a primary source of funds. Remember that credit cards and loans come at a price, and you will likely end up paying a lot in interest charges when you carry a big balance. Pay with cash first and only use credit cards and loans as a “plan B”.

3. Don’t be afraid to compare rates. You’ll find dozens of attractive credit card offers and interest rates on loans you are interested in applying for. Take some time to shop different companies, banks and financial institutions so that you really are getting the best available rate. Make sure you read all of the fine print and are aware of annual fees, inactivity fees, maintenance fees, rewards programs and cashback bonuses available.

4. Know your rights. The Federal Trade Commission has put together several materials for consumers that help you manage debt and prevent you from getting into deep debt. Look over these materials and do some research on your own to make sure you’re aware of your rights as a consumer. Educating yourself on debt management and debt in general can help you make more informed decisions as you move forward.

5. Look for reputable debt management advice sites and books. There are thousands of debt management and personal finance blogs, websites and books out there. Only some are written by reputable debt management or personal finance experts. Information doesn’t necessarily have to come straight from a financial advisor, but it does need to be unbiased and free of personal opinions. Make sure you’re not just following the crowd and are learning from a reputable source.

Borrowing money for the first time can be stressful and you may feel overwhelmed by the amount of information available. Use these tips to manage your debt better as a first time borrower and look forward to a healthy financial future.