Being in debt can be scary. It can lead to sleepless nights and endless worry. However, being in debt doesn’t need to have such a horrible impact on your life. By putting a plan together and tackling the debt you have, you will be able to boost your credit rating and improve your financial future. To make sure you stay on the right track, though, there are a few things you need to avoid. Discover what NOT to do when you’re in debt below.
Don’t make additional credit applications
This may seem like an obvious point, however, a lot of people make additional credit applications for the purpose of getting their existing debts in order. They wish to move their existing debts onto a fewer number of credit cards, for example, or take advantage of the promotional deals available. However, by this point, you will have a bad credit rating, and so the only cards you will be eligible for are those with extortionate APR rates – exactly what you don’t want! Instead, you would be much better off looking at debt relief programs for an effective way of consolidating your debts. After all, every credit application you make is going to show on your credit report, making your score even worse.
Trying to pay off debt without a plan
A lot of people take the following approach: “Oh, I’ll just use whatever money I have spare each month to pay off my debts.” Without a plan, you’re going to find it much more difficult to pay your credit card bills. You need to determine how much money you have coming in and going out every month. This will allow you to see how much money you have available. You can then subtract your living expenses, and attribute a portion of what is left to paying off your debts each month. Of course, if you have more money going out than coming in, you need to reduce your expenses before you do anything else.
A lot of people assume that they should not save money while they are in debt. After all, they can’t afford to. Rather than focusing on paying off your debts first and saving second, you should try to save a little bit of money at the same time as paying off your debts. Why? Well, you never know what unexpected expense could arise, and by saving money you will ensure you don’t have to go deeper into debt to cover anything unexpected, such as a car repair bill.
If you can avoid the mistakes that have been mentioned above, you can go a long way to getting out of debt and ensuring you don’t end up back in debt in the future. It can seem like there is a long road ahead, but the day you become debt-free will make it all worth it.