Many young adults are excited to spend what appears to be free money(credit cards). It is important for young adults to understand how you use credit cards to their advantage. While credit cards are one of the main ways to build credit history and your credit score, most young adults fall in the trap of maxing out credit cards and making minimum payments. The easiest way to fall into a downward spiral is by overextending yourself. There are many types of debt which young adults fall victim too.
Credit cards
Avoiding debt is not something you want to do, unless you plan on paying cash for everything. Today, debt effects your credit score which for some companies use during the hiring process. It is important for young adults to not only shop around for the best interest rate, but to make sure they research and understand the terms of their credit card. Most credit card APR range from 25%-30%. It is important to have credit limit no more $1,000 to avoid getting into serious debt.
Student loans
Most young adult usually come into massive amounts of debt as result of going away for school. Student loans next to home ownership is a loan which usually is your next largest monthly payment. Students loans usually have a 10-15year payoff. It is important for students to apply for as many grants, find as many scholarships or become involved with a work study program. When preparing to go to school get acclimated with your first semester and then start looking for a job. Once in your final two years of school, if you like the area try to find an apartment and live off campus for the two years-this will bring your tuition down dramatically.
Car loans
Car loans should be avoided at all costs, if you are in college. It is important to purchase a cheap reliable car like Honda. I chose Honda because it easy to repair, doesn’t require premium gas and has a long life.
No matter the form of debt whether it is personal loans, student loans, car loans or any other type of loan it is important to always do your research. Always be on the look out for ways to consolidate debt. Young people should not avoid debt altogether. The goal is to minimize the negative impact of debt and maximize the positive impact of debt. Good luck!