5 Things to Avoid when in Debt

28 Jul

Nobody wants to get into a debt problem but it is becoming the norm these days. You may not have intended to be indebted in the past, but here you are, in a problematic debt situation. Is debt becoming a major problem? The best strategy to emerge out from this unlikely condition is to have the determination and the resolve to get out of it.

If you are in debt, you should be careful that your actions do not make your circumstances worse. Here are five things you should avoid for debt relief.

Managing finances properly equals security and peace of mind.

When the budget is tight, it is often enticing to settle only minimum payment required every month for credit cards. Doing so would somehow save you from nagging calls officiated by credit cards’ collection departments. But you should understand that you would only prolong your agony. By paying only minimum payment required, you agree to allow your credit card debt to grow exponentially over time. If you keep on doing this, you would end up paying your credit card debt for most of your life. Your minimum payment would just be enough to cover monthly interest payments.

 2. Taking the wrong debt consolidation product.

Debt consolidation is ideal. But it could be confusing because there are numerous debt consolidation loans available in the market. Be careful when choosing a loan to consolidate your debts because you might end up picking one that has higher interest rates and more additional charges. The best debt consolidating loans are those with lower interest rates, no additional charges, and better terms.

3. Paying more for credit counseling.

Credit counselors really help. They could give you guidance on how to control and manage your debt. They could even lead you to specific options and help you get into negotiations with your creditors for lower fees, rates, and penalties. But be careful because some debt counselors charge high fees. In general, those that actively advertise tend to charge more to customers.

4. Borrowing money from family or friends.

Fortunately, you may have well-off relatives or friends who are willing to extend financial assistance to you. It is ideal to borrow money from them because for sure, they would not demand interest payments. Most of them also do not set dates for repayment. Some do not even expect to be paid in return. However, in many cases, strained relationships ensue. This is more possible if the person lending cash suddenly needs his money and demands to be paid back immediately.

5. Filing for bankruptcy.

It is actually a debt relief or solution. It could be your final resort. But it is the thing you must avoid the most. Bankruptcy takes its own costs, financially and socially. Filing for one would eradicate your credit standing for countless years to come. It could also set a stigma. Remember that all debts are obligations that should be paid no matter what happens. That is the most honorable thing to do.

Andrew writes at http://www.australianlendingcentre.com.au , where he offers tips and advice on debt consolidation.

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