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There’s lots of advice floating around about what to do when you’re in debt—tighten your purse strings, pay down your debts in a certain order, try various relief strategies, etc. At the end of the day, there’s no one perfect way to handle debt. The most relevant advice to your financial situation depends on specifics like what kind and how much debt you have. It’s up to you to wade through the sea of advice available to decide upon the best course of action.
But what about what not to do when you’re in debt? Even if you’re still not 100 percent sure how you’re going to address your debt, you can still avoid these behaviors that’ll make it worse.
Don’t: Assume the Minimum Is Enough
Consistently paying the minimum amount due on various debts will keep late fees and collectors at bay. But it does nothing to stop interest from piling up on the remaining balance. Paying only the minimum amount due becomes very expensive over time, possibly adding hundreds or thousands of extra dollars onto your principal balance.
Don’t: Take Out a Payday Loan
You’re tight on cash but you still have to pay your utility bills, buy groceries and put gas in your car to get to work. You check the calendar to see when you get paid, and your heart sinks when you realize you’ve still got about 10 days to go before direct deposit hits.
You may consider getting a payday loan just to tide you over until your next check. After all, its main appeal is that you can usually get one quickly and with little effort. But beware of this supposed quick fix. Short-term loans carry “extraordinarily high interest rates” that launch people into “a cycle of needing to continually borrow to stay afloat.”
Don’t: Transfer Your Balance Without Knowing the Terms
Always read the fine print. Transferring your balance from a high-interest credit card to one with a lower or nonexistent Annual Percentage Rate (APR) can help make repayment more manageable. But it’s highly important to understand the terms before doing so. How much will you pay in fees? And how long does the period of no or low interest last?
Don’t: File for Bankruptcy Too Soon
Before you say enough is enough and resign yourself to filing for bankruptcy, consider whether any less drastic debt relief solutions could work for you. There may be a way to address your debt without having to take on the black mark of bankruptcy on your credit history.
Some people pursue debt settlement as an alternative. Looking through Freedom Debt Relief reviews, you’ll see that enrollees mention how settlement helped them avoid bankruptcy. Instead of seeking forgiveness for your debts, settlement still involves paying them back—but you’ll be saving up money and negotiating with creditors instead, hoping to reach a more manageable settlement lower than the original balance.
If you’re at the point of considering bankruptcy, try exploring alternatives or reaching out to a financial advisor to explore your other options before you file.
Don’t: Forget to Save
When saving takes a backseat to debt, you’re only setting yourself up for more debt each time an unexpected expense arises. Without an emergency fund, routine life mishaps—like a trip to urgent care, the check engine light illuminating, your dog swallowing a sock—end up adding to your credit card debt.
As it stands, four out of 10 adults in America say they couldn’t cover a $400 expense without borrowing money or selling something. This underscores how important it is for everyone to keep building their emergency savings to a healthy level.
Don’t: Push Debt into the Future
It’s easy to keep “kicking the can down the road” when it comes to debt, saying you’ll worry about it in the future. But the sooner you act, the less interest you’ll have to pay off.
Remember these things when you’re in debt so you have the absolute strongest foundation for addressing what you already owe.