Not all debt relief solutions will help you over the long run. When youre dealing with debt, you may want to jump at the first solution that comes your way. But some of these solutions could actually hurt you. Here are five that you want to avoid when trying to get out of debt.
Paying Credit Card Minimum Monthly Payments
Paying the minimum on your
credit card bill seems like a smart move for getting some debt relief. After all, it means youre actively paying off your debt, and youre paying the amount the credit card company requires of you. It also may leave you with extra cash for other things. However, the minimum payments on credit card bills are usually not high enough to pay down your debt in a timely manner. And the longer a balance remains on your card, the longer you are charged interest on that balance, increasing the overall total debt you have to pay. Make an effort to pay more than the minimum, as much as is possible for you, so you can eat into the overall total, accumulate less interest, and pay off your debt faster.
Seeking Debt Relief from Friends or Family
When youre facing an overwhelming amount of debt, and you have friends or family members that can afford to help you pay for some or all of it, taking a loan from them may sound like a great idea. Theres no interest rate to worry about, unless you agree to set one, and, in theory, you can pay it off at your own pace without having to worry about due dates or defaulting on the loan. But using a friend or a family member as your
debt relief solution can lead to strained relationships. Without a legal agreement, you wont feel the same amount of pressure to pay it back, and the other person will certainly become upset if you dont pay back your debt.
Paying Off Debt with a High Interest Loan
You just found a loan with a credit limit that covers all of your current debt, so it seems look good financial sense to take out that loan, pay off all of your debt, and have only one payment to take care of. While this is a debt relief solution that can work, you always need to look at the fine print of the loan terms. Make sure you know what the interest rate is and compare it to all of your current credit cards and loans. If its a higher interest rate, then youve just found a solution that will give you more debt.
Credit Counselors with High Fees
Credit counselors can help you manage your debt, so you dont want to necessarily rule them out entirely. But you do want to be careful about which counselors you approach. If a credit counselor offers to
help you at a high fee and asks you to pay upfront, be very wary of that counselor. Some credit counselors prey on people who are vulnerable because of their debt situation, and they will take your money without actually helping you. Do your homework before hiring a counselor to deal with your debt.
Bankruptcy as a Debt Solution
Yes, bankruptcy is a viable
debt relief solution , but it should really be your last resort. Many financial advisors recommend avoiding it entirely, if at all possible. While it can erase some of your debt, it cant always relieve your from all of it. You could lose property in the process, such as your car or your home, and it will hurt your credit report for several years.
A solution to your debt problems does exist. Start by understanding your debt, educating yourself about the best ways to reduce it, and being aware of what doesnt work.
