Top 5 Mistakes When Trying to Get Out of Debt
Worrying about money is never nice but if you find yourself having financial troubles then you need to be very careful about the ways you try and get out of debt, as there are many mistakes that can easily be made, which rather than solve problems, actually create them.
1.Don’t Take On New Loans
It can be very tempting to take out new loans to repay existing ones but this is one of the traps that result in ever increasing debt problems. If you are struggling to pay existing debts, it is likely that this will have a negative impact on your credit rating, meaning that you may be forced to borrow at even higher interest rates. This will inevitably lead to problems as your payments will increase and you will soon find yourself having difficulty paying off the new loans.
2.Don’t Close Credit Card Accounts
Once you have succeeded in paying off the balance of your credit card debt, it may seem like a sensible option to then close the credit card accounts to avoid getting into the same situation again. However, this can in fact cause problems, as it can have an adverse effect on your credit rating, making it harder to secure loans in the future and potentially exposing yourself to even higher interest rates.
3.Don’t Make Minimum Payments
Most financial services companies make money by encouraging you to take longer to pay off your debt. The longer you take to pay, the more money they make off the interest payments. So it is important to remember that while merely paying the minimum may keep creditors off your back, it is not enough to reduce your balance.
4.Don’t Try and Ignore the Problem
It is human nature to try not to think about the bad things in our lives and easy to tell yourself that it will all work out in the end but unfortunately, the only way to deal with debt trouble is to tackle it head on. If you know you are going to have difficulty making your next payment then talk to the creditor. If this is proving difficult then you can contact debt management agencies that can help you with these issues and by taking the initiative and being proactive – rather than just hoping it will all go away – you will have a distinct advantage.
5.Don’t Be Afraid to Seek Professional Advice
Careful research always plays an important part when attempting to get out of debt. You need to examine all the available options out there, whether it be lowering your mortgage payments or finding alternative suppliers for utility bills or car insurance but one can never under estimate the importance of seeking professional advice from financial experts. The world of finance is a very complex one and experienced professionals can help you avoid potential pitfalls and find the right debt solution for you.
Garry Hudson writes about all things debt related, whether you need Debt Management Solution advice or Bankruptcy Advice then Garry will have come across these areas in his decade of experience in all things debt. Garry works for one of the largest debt companies in the UK Baines and Ernst
- Debt Relief with Credit Card Settlement (debt-consolidation-2u.com)
- Is transforming debt into wealth easy? (2011tax.org)