Vesna Plakalovic
Prof. Sanel Halilbegovic
FSMA 312 2A
19.03.2013
The Debt/Interest Dilemma
A forecast of profit requires an estimate of interest expense, which depends on a projection of debt (because interest is debt times the interest rate). The amount of debt required, however, is dependent on the year's profit. The more profit a firm earns, the less debt it needs to support its assets. Hence we need debt to forecast interest but we need interest (and hence profit) to forecast debt. This situation results in a computational impasse. The debt/interest dilemma: Planned debt is required to forecast interest, but interest is required to forecast debt. There are literally hundreds of ways to eliminate your debt. Some of these methods can actually be very effective. For example, a debt consolidation loan using the equity in your home can significantly reduce the interest you pay each month. Others like debt settlement or debt negotiations can have a negative impact on your credit rating. Some companies promise to help you rebuild your credit rating after settlement but this is a slow process no matter whether they do it or you do it yourself. This method, along with bankruptcy should only be considered if all other options fail.
Before you consider any option to eliminate your debt you need to find out why you are considering this in the first place. Simply obtaining a loan or settling your debt is not going to solve the problem for most people.The odds are good that once you have your debt under control you will start piling it on again. This is because most people take these actions without a plan to prevent this from happening again. Another important point that you should consider is that for some there is no need to go through a 3rd party for help with your debt. It's very possible that you have all the money you need to pay your debts and other expenses and