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Debt payment methods to avoid

By: Louise Mosqueda0 comments

Having debt can be difficult as it can hinder you from taking out loans or applying for new credit cards, and it can even dampen your spending habits. But it’s important to know that just because you are in debt now doesn’t mean you always will be. There are plenty of ways to improve your credit standing over time. It’s just a matter of finding the solution that works best in your circumstances.

Healthy ways to pay your debt range from cutting your expenses to finding help from your friends and family. Other ways you can pay off debt include:

  • Discussing options with your credit provider
  • Seeking advice from a financial counselor
  • Changing your repayment
  • Lifestyle changes

It is all a matter of finding the method that works best for you. However, not all options are good as this may just be deferring the problem.

Avoid these debt payment methods

For every option to reduce your debt, there is a potential problem waiting. Although your overall goal should be to eliminate your debt, here are some popular debt repayment methods that you should avoid:

Dipping into your emergency funds

Although it’s tempting to use your emergency fund to get rid of your debt. However, when an actual emergency arises, chances are you won’t have funds. Instead, you will either take out a loan or use your credit card. This will leave you with the same problem you started with.

Credit card cash advance

A cash advance is a fast and easy way to get money and pay your debts. However, it has its drawbacks. When you take out a cash advance, expect to pay fees. Depending on your bank, some don’t have grace periods. That means you need to settle on the stated day or risk more charges.

Payday loans

Another fast way to get money to pay off debt is through a payday loan. These loans are easy to apply for, but the interest rates are high and could pose a problem when it comes time to repay the debt.

Borrowing money from friends and family

Avoid borrowing money from your close friends and family as this could lead to strained relationships, especially if the borrower misses deadlines and refuses to talk to the lender about the money. So, if you do borrow money from your relatives, make it a point to pay them back as soon as possible. When you give them a date of payment, don’t miss it. Lastly, make sure to thank them and show your gratitude for their help.

Once you’ve paid off your other debts, some of your money is now free to use. You can then use this time to get yourself a car for everyday use. If you’re still fixing your credit score, then a consumer lease is a popular option for people with bad credit and can help you get a car and improve your credit score. All you have to do is make sure that you maintain payments on time, every time.

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