Credit Card Debt Part 3

Remember Maria who is buried in credit card debt that I wrote about several weeks ago? She said that she has tried borrowing from lending companies but they refused her. She wants to resign to start a small business. She is asking what business I can suggest that will surely grow very fast but her problem is that she does not have the capital plus of course, she still has her credit card bills.

This is why you should use your credit card only when you will have the cash to pay when the statement arrives. If you use it for emergencies, you must make sure that you pay it off completely as soon as possible.

Many employees, especially those who have so much credit card debt want to go into business to be able to make more money to pay off their debt. It is a very good strategy to earn more income to pay off debt. However, the results of business and/or sidelines are not under your control. In fact, if you are not careful, you might lose your very source of income, your job, because you are working on your sideline and not giving your regular job the attention required of you.

It is worse if you resign from your only source of income to start a small business when you are deep in credit card debt. Going into business is the riskiest investment you can make. Only 1 out of every 10 who go into business is actually successful. If you do want a sideline, just make sure that you really like it and have the capability for that type of sideline. We can talk about this again in future columns.

Another major issue is raising enough capital for your business, should the opportunity arise. This can happen only if you keep your credit rating good. This means that you must continue paying your credit card company and not allow them to tell all the other financial institutions that you are a bad credit risk. All financial institutions share information about bad credit risks.

The only reason you can borrow at this point is consolidate all your credit card debts into one loan. You must, however, declare this to the company that is willing to lend you. Most of all, you must make sure that you will be paying less interest rate to this new lender compared to the interest rate of the credit card companies. You must look at all the hidden costs like service charges etc. Those are not immediately noticeable.

Let me remind you that it took you some time to accumulate your credit card debt and it may take you even longer to get out of it especially if you do not start immediately. But do not despair. So many have your same problem but so many were able to get out of it because of discipline and determination.

Francisco J. Colayco is an entrepreneur, a venture developer and financial advisor. He is the Chairman of the Colayco Foundation for Education and the Author of Four Publications, Three of which are Bestsellers: “Wealth Within Your Reach” (Awarded 2004 National Book of the Year, Business and Economics by The Manila Critics Circle), “Making Your Money Work” (Nominated 2005 National Book of the Year, Business and Economics by The Manila Critics Circle), “Pera Palaguin Workbook” and just off the press, “Money For Kids.

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