Understanding Debt
Debt can significantly impact your financial health, so managing it effectively is crucial.
Types of Debt:
Credit cards
Student loans
Personal lines of credit
Auto loans
- These each have different repayment terms and interest rates. Understanding them will help you create a personalized debt management plan.
Interest Rates: Be aware of the interest rates on each type of debt. High-interest debt, like credit card balances, can accumulate quickly and become a significant financial burden.
Debt-to-Income Ratio: Calculate your debt-to-income ratio (DTI) to assess your overall debt burden. DTI is the total amount of monthly debt payments divided by your gross monthly income. A lower DTI is generally considered more favorable.
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