bad debt: What You Need to Know

Making Bad Debt Worse

With bad debt hanging over your head, your options may seem few or even nonexistent. Stress can easily overwhelm you and cause inertia and discouragement to take over. When it seems like there is nothing you can do, try not doing some of the following things, which are guaranteed to drive you deeper into debt.

The first is obvious: stop spending money on non-essentials. You cannot stop paying rent or buying food, but you can stop buying fast food, prepackaged food, clothing and shoes, cosmetics, and any number of other items that are not strictly necessary. Sometimes distinguishing between wants and needs can be hard, but it is important in helping you improve your financial health. Some people, for instance, consider entertainment a necessity and can easily spend $100 for a night of dinner out, drinks, a movie, and gas. You could save all that by inviting friends over for potluck and a video. Smart choices will allow you to cut down while still enjoying yourself.

Another money mistake you may be tempted to make when you are in debt is to get new credit cards or loans. You may think that you can consolidate bills or have some extra spending money if only you get one more card. This, however, perpetuates the cycle of debt and does a lot of damage to your credit score. Soon, that great opportunity that seemed like a way out is just one more bill you are struggling to pay. If you aren’t in a position to decrease your debt, at least don’t add to it.

You may be tempted to get a payday loan or cash advance on your paycheck if you are having trouble paying your bills. Cash advance centers have sprung up in most states in recent years, claiming to be the solution to your debt problem. The trouble is that they charge extremely high rates of interest, steep late penalties, and refinancing charges. They can become high-interest debts that are very difficult to pay off. Try to get a loan from a family member or friend; ask your employer for an advance if possible; cut down more drastically on expenses. Whatever you have to do will be worth it to avoid a cash advance loan.

A good way to increase bad debt and add to your financial stress is to pay bills with your credit card. This only increases your credit card balances, driving up minimum payments. If you have to miss a month, then the penalties are enormous. Much like with payday loans, it is too risky to pay other bills with a high-interest credit card. Other options can include contacting your other creditors and seeing if they will either give you an extension or a lower monthly payment, borrowing money from family, or cutting down in other areas.

Worse than paying with credit cards is ignoring your bills and creditors. Sometimes, you may have to prioritize your bills. The most important are rent, taxes, and utilities. Then come loans and credit cards. Late fees may make your next payment higher, however, so try to budget your money so you can pay everything on time. Don’t ignore them. They don’t go away, they just get worse and harder to handle. Contact your creditors to see if you can work out a payment agreement that fits your budget at this time.

If you are struggling and are desperate to pay your bills, it is time to find a reputable and effective debt settlement service. Debt settlement can help take a lot of the worry off your mind. The important thing is to take action. Stop worrying and start doing something about your out-of-control bad debt. With some modifications in lifestyle and spending habits and help from a good debt settlement service, you can live debt-free.