Don’t Fall into These Five Debt Traps!

Written by  //  2015/08/12  //  Financial Aid  //  Comments Off on Don’t Fall into These Five Debt Traps!

You may feel like you have no options when your expenses start to outweigh your income, but making the wrong decision when it comes to debt will only make your finances worse. Though fast cash and payment structured settlements like My Lump Sum can definitely help you dig out a shallow debt hole, bigger debt traps are designed to keep you paying off your debt for the rest of your life. These are the five most common you must avoid if you want to become debt-free. 

Payday Loans

Payday loan companies pray on desperate people, so they know they can get away with insanely high interest. Payday loans provided you with money that you are supposed to pay back with your next paycheck, but most people can’t afford to pay off the whole loan. This means the loan is extended with extra fees and high interest, which only puts you in more debt than you were before you first got the payday loan. 

Credit Cards

Credit cards can be a helpful resource when you are running low on cash, but they are also a great way to end up in long-term debt. If you are going to use a credit card, then you need to make sure you can pay off most of the bill each month. Paying the minimum payment may help you right now, but it will put you in major debt in the future if you can’t pay back everything. 

Debt Consolidation

Debt consolidation is a common debt trap people fall into because getting one monthly payment to pay off your debt is very appealing. The biggest problem with debt consolidation is that it extends the terms of your loans, so you will be paying off the debt longer in some cases.

Co-Signing a Loan

Refusing to co-sign a loan for a friend or family member can be tough, but there is absolutely no reason to attach yourself to someone else’s debt. It only takes a few seconds to co-sign a loan, but you may be forced to help pay off that debt for the rest of your life. 

Splurging on a House

Everyone wants to live in a nice house, but you must purchase a home that is affordable. You should not splurge on too much house just because you are approved for a large home loan. Buying too much house is going to force you to use credit cards and take out other loans just to pay your mortgage each month. Find a home payment plan that will work with your budget in the long term.

Living within your means and not falling into these debt traps is a much more feasible way to avoid massive debt and crippling financial disaster.

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