There are right ways to deal with your debts, and there are wrong ways. It's important to avoid handling a debt situation in ways that will make things worse. Going about it the wrong way could make it harder to pay off what you owe and have even more negative impact on your credit rating. So here are some of the wrong ways to deal with your debts …
1. Ignore Them
One of the worst ways to deal with your debts is to put your head in the sand and pretend you don't have a problem. Debts don't simply go away if you ignore them. The interest will continue to accumulate and you could face legal action. You must acknowledge the seriousness of the situation, or your financial future could be wrecked.
2. Run Away
Some people think that by moving they can leave their debts behind them. Not so. Creditors won't just give up and write the debt off. The chances are pretty high that they will catch up with you at some point. Some companies sell the debt on, and the new 'owner' of the debt will be pretty tenacious in pursuing you for the money you owe.
3. Borrow to 'Pay off'
Have you heard of the phrase 'robbing Peter to pay Paul'? Consolidating your debts can make sense under some circumstances. This means taking one loan to pay off all the others, so that you only owe one creditor. However, this should only be done as part of a sensible plan to pay off your debts. Don't just take out another credit card to pay off others - this will only mean that you end up in greater debt.
4. Keep Spending
If you can't see how you're going to get out of debt it can be tempting to abandon the attempt and just keep on spending. After all, if you're going to be in debt anyway you might as well throw caution to the winds, right? Wrong! People have cleared huge debts that seemed impossible to deal with. Don't keep spending and make the situation even worse than it already is.
5. No Plan
A common mistake with debts is to fail to make a plan on how to tackle them. Vaguely throwing a few dollars at a credit card balance or loan isn't going to clear the debt. You need a proper plan to tackle the debts in the right order and work to a schedule. This also helps psychologically, as you can see the debt slowly but surely reducing.
6. Fail to Negotiate
People to whom you owe money are generally fairly accommodating if you talk to them and show that you intend to pay off the debt. They may freeze the interest or, on larger debts, accept a smaller amount as a final settlement (on the principle that something is better than nothing). So if you fail to negotiate with them, you may miss the chance to reduce your debt.
7. Not Changing Spending Habits
Finally, one of the worst mistakes with debt is to fail to change your spending habits. It's time to accept that you have to 'cut your cloth'. Whether spending or circumstances got you into this mess, you need to lose your shopping habit and cut your expenditure right down.
However gloomy the situation seems, it is possible to pay off debts completely and start afresh. But you must take control and seek help. Have you ever got into debt something silly?