How Can You Avoid Falling Into a Debt Trap while Buying Your First Car?
More and more people are falling into perpetual debt and they do not even realize that they are in a debt trap. Today people focus on their credit score and try to be good customers. You are purposely staying and falling into debt even when you actually do not require it, so you may be having the choice of using debt whenever you wish to. Ultimately, you would find all your money going towards monthly payments. You would start using your credit card for managing your everyday cash flow. Today, most of you could not even afford your car that you are currently driving had you not got it financed. That is really sad. Experts believe that ease of borrowing certainly is pushing millennials slowly and surely towards a dangerous debt trap.
It is a challenging task to crawl out of this sort of a dangerous debt trap. Here are some effective ways of warding off some of the temptations that are known to really play havoc specifically with your finances. Many people end up wasting a lot of money when they get tempted to buy things simply because the interest rates or the prices were down. This is how they end up burning their fingers with a number of credit card debts, consumer loans, and personal loans, etc. It is more important to focus on not getting into a debt trap while buying your first car than worrying about ways to get out of it. Automotive debt is quite overpowering in the United States and we are given to understand that Americans owed over $1.14 trillion in terms of auto debts as in September 2018. It is better to be safe than sorry. Hence, here are a few effective ways of staying out of the debt trap.
Stick to Using Cash
Budgets are always necessary but very few people actually bother to chalk out a budget and seriously stick to it. Budgets are more like your New Year resolutions. They actually go out of the door in a jiffy. The single most effective way of avoiding debt is to actually focus on spending cash only. You would end up spending what you actually have. Hence, it is a good technique of staying away from accumulating massive credit card bills.
As per forbes, suppose you are already in debt, in order to eliminate your debts faster, you must start using cash. You could start paying your smaller debts initially to build momentum then work slowly but surely toward tackling your largest existing debts one after the other. By the time a huge chunk of your debts are paid off, you would be getting used to using cash. This way you could pay off all your debts faster. In the case of overpowering debts, you may seek effective debt consolidation. In this context, remember to seek expert assistance from NationaldebtRelief.com, the best debt consolidation company, for perfect debt relief and debt management solutions.
The best way of avoiding the vicious cycle of debts is to pay for your first car using cash. It is pretty astounding to find several people who seem to be having adequate available cash in their bank savings account yet they borrow for purchasing a car. It really makes absolutely no financial sense in borrowing money for buying a car when you are having ready cash in your savings account. However, you must remember that you should keep aside sufficient cash for unanticipated or emergency expenses. The only money that is in excess of the minimum emergency amount should be used to buy a new car.
Try Going Easy On Your Purchases
As per financial experts, people are shopping and splurging money thanks to the easy and hassle-free availability of credit. Today being in debt is no longer a taboo and the present mindset is to take a loan if you cannot afford what you want. In fact, you would be amazed to see massive EMIs on young adults who may have just imitated their career. Needless to mention accumulating numerous loans could be a setting yourself on the road to financial disaster and a sure-shot debt trap. You must borrow only when it becomes absolutely necessary to do so. You could consider borrowing if you are coming up with an asset which would be fetching you money.
Consider Restricting Your EMIs
An EMI for your vehicle, another for your housing loan, and another one for your television, you would find that the list seems to be endless but you need to focus on limiting your EMIs. You would understand the true pressure of EMIs when you go through a financial crisis. This is surely going to happen if you do not think carefully before taking out a loan and making frivolous purchases. You must never confuse your cash flow with your permanent earnings. You need to understand that all your calculations would go for a toss if there is some sort of a setback in your career front.
Be Determined about Breaking the Cycle
The car debt cycle often starts with young adults buying their first car after completing graduation. You must be going through a transitory phase from literally a starving student straightaway to an employed adult. This often implies there are no cash savings hence, the car loan becomes a necessity. You could minimize the borrowed amount by purchasing a used car that is not very expensive. You may focus on keeping the loan term shortest possible. Once the debt has been paid successfully, you could divert the monthly savings straightaway to your personal savings account. Go on paying yourself every month until you have enough cash to buy a new car.
Conclusion: Keep Driving
One of the most effective techniques of minimizing your transportation expenses would be to maintain your car with the utmost care and keep driving it for many years. You need a car for traveling from one point to another reliably, safely, and comfortably. Through some prudent planning, it would be possible for you to avoid the debt trap and enjoy a family vacation too.