When in debt, lots of people just want to keep away from declaring personal insolvency at any cost. Sadly, that can be a very heavy cost, both financially and socially. So, with that stated, here are the top five things citizens do for debt relief that you should avoid:
Paying the bare minimum payment on your high credit card balance: Paying the bare minimum on your credit card statement seems like the correct thing to do, but the way your interest, which is likely over 20% at present, is actually calculated, it really means that your total amount of debt will grow over time. (Plus, think about it: 20% APR on a balance of $500 or more is huge!) If you don’t strive to pay that sucker off quickly, you’re making the problem worse.
Looking for a loan from friends or family: Taking a loan from friends or family may sound like a great idea, and in a number of cases it can be. A number of us do have that family member that is honestly more worried with your financial security than being paid back. Usually speaking, however, using a person, no matter how chummy, as a bank is the way to severely strain relationships. You may not feel pressure to pay it back and your relations could easily be spoiled if the other person is in a bit more of a rush to be paid back.
Taking out a high interest loan to “merge” debt: Granted, it sounds dazzling to pay off your major obligations and twist them into a single monthly payment, you always need to look at the fine print of the loan stipulations. The new loan may likely have a sky high interest rate, so you will really rack up more debt long term. It’s just prolonging the agony.
Looking for a credit counselor with high costs: Credit counselors can help get your debt under control, so they should not be ruled out entirely. If a credit analyst asks for a high rate or insists you to pay first, leave. Some credit counselors con people who are desperate because of their financial state, taking money without actually helping. Also try to stay away from the credit card debt counselors you see on the TV ads. Even if they do help, they primarily renegotiate your debt for a reduced rate in substitute for an completely horrific credit report you will carry around for the better part of a decade.
Insolvency in general as debt reprieve. Bankruptcy is the only thing talked about here that can be considered a debt relief answer, but it should really be your very last resort. It can erase some of your debt, but keep in mind, debt is an responsibility, and often obligations tend to stick. You could lose possessions and it will most likely hurt your credit report, again, for the better part of a decade.
There are a lot of great things to do to help with debt relief.
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