The Basics

Here you can learn about formal and informal sources of debt, and rights and responsibilities of the debtor and the creditor. The resource teaches how to manage debt and how to begin repaying it. Here is some common vocabulary:

Creditor: who you owe money to

Balance: how much you owe

Interest Rate: percentage of the loan charged to the debtor

Minimum payments: the minimum amount you must pay to avoid fees

Accredited vs Non-Accredited

Creditors that are accredited use background checks to assess whether or not you can make regular payments. Non-Accredited creditors can be easier to get a loan from but have high-interest rates, which can quickly balloon debt to unmanageably high levels.

Debt Management

There are a variety of ways to pay down debt and it can be difficult to choose which way is best. You can use our Debt Reduction Calculator to try out different scenarios and see how much time and how many interest payments it would take to become debt-free.

To fill out the spreadsheet, you will need to know how much money per month you can dedicate to paying off debts, interest rates, minimum payments, and the balances of each account. hen you can select the debt management method. On the first page it will calculate the initial snowball (how much of the monthly payment will go to making payments larger than the minimums), order of creditors to pay off, how much interest is paid to each creditor, and how long it will take. The second page shows a payment schedule (how much to pay to which creditor when). Some different methods of paying down debt include the snowball, avalanche, and stair-stepper approaches. 

Snowball: pay off the lowest balance first

Avalanche: pay off the highest interest first

Stair stepper: a combination of both – subcategorize debts based on balance and then pay them off, highest to lowest interest, within the category

There are risks and benefits to each approach, depending on the amount and type of debt you have. It is important to note that, though it may be hard to come up with the larger sums of money, you will reduce your debt sooner and end up spending less money in the long run by paying off those debts with the highest interest rate first.

Loans

Loans allow you to “divide” the big expenses into small expenses; that is, make small regular payments in a few months or years instead of one big expense.

40% of those who have a loan in Armenia have taken out a loan for as much as they needed at the moment, rather than as much as they could afford. The results of the “CBFU 2014” research of the Central Bank of Armenia prove this. In this article you will find the rules for taking out a loan, which will help you be more careful when taking out a loan and making reasonable decisions rather than emotional.

The reasons for needing a loan are varied. Financial institutions offer various loans according to those goals and requirements. Find out more about loan types to know which one suits your needs best to make better decisions.

To learn more about taking out loans, visit these sites:

Loan selection, repayment schedule, and currency

All your questions about loans answered

References

Debt Snowball Calculator. (2019, January 8). Retrieved April 23, 2020, from https://www.vertex42.com/Calculators/debt-reduction-calculator.html

Landes, L. (2018, July 19). Debt Reduction Methods and Philosophies: Snowball, Avalanche and More. Retrieved April 23, 2020, from https://www.consumerismcommentary.com/debt-reduction-methods-and-philosophies-snowball-avalanche-and-more/