Investing in your debts
The considerations you have to make to do so
If you are a resident of Texas, then a popular way of getting out of your debts is through debt settlement . However, if this isn’t the option you are considering then you can try investing in your debts. One of the wisest approaches to money management that has been surviving through the centuries is investing in your debts. Although debt investment might not provide you with a flow of incoming cash, however it does help you in reducing the money you owe as debt while keeping the value of your assets and cash stable. This results in an overall financial gain for you. A little amount of planning and information can make your investment in debt successful and help you in building a future.
- Consider the risk involved in investing in your debt. While it is true that losing out money which you invest is not an option, it is better that you don’t overextend your wallet and face financial shortage in other areas of your life. The first thing for you to do is making sure that the money you are investing is an amount that you can do without.
- You should evaluate the rate of return as compared to other investment opportunities. This rate is the annual percentage and on a credit card it can rise as high as 30%. Thus when compared to a loan with 7% rate of return you would prefer to put your money in to the credit card debt.
- You should balance your investment between debt and market and short and long term. Debt investment provides immediate relief unlike other investments. In case you have long term goals in mind which you want to achieve in a specific time frame, you should balance between the two.
- You should close the highest-rate accounts first. As you keep closing more accounts and multiple debts, you can either put more money to the remaining accounts or invest in savings market or market investments. If you don’t have immediately available savings you should build up a buffer so that you don’t dip into debt again.
- After your debts are paid, you should continue investing in market investments. You will get financial freedom when out of debt and will be able to work towards larger financial goals.
Thus you can see that the above considerations are important in making investment in your debts.
[Pablo Gibson is an Associate Editor with Oak View Law Group. He has been writing on financial topics over the years with special focus on American and European economy. Pablo also takes interest in debt related issues and contributes articles on debt relief to personal finance blogs.]