The 7 Biggest Personal Debt Mistakes You Can Easily Avoid
Proper money management is not second nature for most people, but it does not have to be learned through trial and error. A few simple mistakes along the road can cause serious consequences as you continue to fall into financial traps. Whether it is student loans, credit card debt, or not being prepared to handle the bills following a medical emergency, our tips will help you avoid common mistakes so that you do not live a life of constant struggle.
Allowing Credit Cards to Put You In Debt
Spending far beyond your means under the false security of a credit card is a huge mistake that far too many people make. It’s great when you need to get out of a tight spot until payday, but interest continues to build the longer the balance is unpaid. Only use cards in an emergency, and never charge more than you are able to cover by the end of the month.
Not Paying on Time or Ignoring the Bill Altogether
Immediate penalties and a gradually lowering credit score are the obvious consequences of late or missed payments. There are times that it’s not possible to pay the entire balance one month if you have other important expenses. Make it a priority to at least pay the minimum by the due date if you cannot afford anything greater.
Scraping By With Minimum Payments
Most people in debt notice a major gap between the full balance amount and the minimum due on their monthly statement. A few simple budget changes can provide additional extra money to put toward settling the balance sooner. Strive to pay as much as possible each month rather than settle for the minimum simply to comply with the agreement terms.
Failing to Learn and Improve Your Credit Score
Every adult should know their exact credit score and keep a close eye on any changes. It’s absolutely foolish to think that mistakes do not happen, and the only way to avoid the consequences it to monitor your report. There are always ways to increase your score so that you can get lower interest rates anytime you take out a loan in the future.
Making Credit Card Debt a Low Priority
TransUnion, one of the major credit bureaus, reports that individuals trying to handle multiple debt accounts typically put their credit card at the lowest priority. It may carry the lowest interest rate, but this amount is going to keep growing until it is completely paid off. If you’re already falling behind, it’s fine to focus on the card with the highest interest rate while paying the minimum on other accounts.
Not Coming to the Original Lender for Help
It never hurts to make a friendly call to your creditor before it’s too late. You actually stand a chance of negotiating a more reasonable payment if you try to speak with someone that has authority over the account.
Extending the Length of Your Loan with a New Repayment Plan
Always stick with the original terms of your loan if you can continue to make payments on time. You could potentially save hundreds or even thousands of dollars in monthly interest rates if you find other ways to cut personal expenses.
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