Debt can be scary – some of us will do anything to get rid of debts. However, certain ways of dealing with debt could do more harm than good. Here are some of the worst ways of dealing with debt (and what you should be doing instead).
A common bad way of dealing with debt is to ignore it in the hope that it will go away. This is what people do when they can no longer pay their debts. Unfortunately, debts can only be ignored for so long. If you succeed at ignoring the late payment letters and phone calls, the next stage will likely be to send out debt collectors to your home. These debt collectors will keep chasing you up and may even take the issue to court. Fail to go to your court hearing and you could then be committing a criminal offence.
Changing your name/moving home
Some people change their name and home address to escape debts. This means sacrificing a lot just to escape debts – and it doesn’t always work. If you are found out, you could even be convicted of fraud.
Using a loan shark
Loan sharks are lenders that charge very high amounts of interest, while often resorting to dodgy and perhaps even illegal measures. Many people turn to loan sharks when all other lenders have rejected them. The biggest problem is the getting out – loan sharks may use your debt as a way of owning you and may even pressure you into taking out more loans.
Relying on friends/family to get you out
Some people have no choice but to call upon friends and family when debts get out of control. However, constantly relying on people around you to get you out of financial trouble is likely to have a negative impact on your relationships with these people. When you start owing family and friends a lot of money and not paying them back, things can start getting particularly bad.
Burning through retirement savings
If you have money tied up in savings or real estate that you plan to use to fund your retirement, be careful of accessing this early to pay off debts. You don’t want to struggle through your retirement because you spent all of your pension on paying off your debts.
How should you deal with debt?
Debts need to be paid off. If you don’t have the money to pay them off, there are ways of making debts more manageable. These include consolidating debt and negotiating directly with lenders. You can discover a few alternative ways of dealing with debt here.
Debt settlement companies and debt discharge companies may be able to help you deal with debt. It’s worth reading reviews to find honest companies. For instance, a lot of people don’t believe Debt to Success is a scam. Such companies will have your best interests at heart and will do everything they can to help you out of debt.
Going bankrupt is the most extreme way to deal with debt. It comes at a big cost – some people lose their home and aren’t able to use credit again for years. However, all your unsecured debts will be wiped and you will be free of them. Bankruptcy can therefore be a good way of escaping debt but should only be considered as a last resort when all other options have been exhausted.