When embroiled in a debt debacle, specialists often caution against taking a drive through the risks suburb, as it could in the process leave a huge scar on on your credit score skin, as well as swell the fees and taxes you pay. But asides a risky drive, there are some ideas we might have about managing excessive debts, some of which can be considered “very dumb”.
California based general interest website, How life works, has identified some of the dumbest ways of handling too much debt or even seeking fresh capital (debt); all of which should be avoided.
Paying a creditor less than you owe
When you pay only a portion of your debt, it heightens the growth of the amount owed. This deed in turn compounds the original problem and forces you to seek help from different, and less dependable sources. In such cases, you might not be in the position to set the repayment terms, worsening the overall debt situation you attempted getting out of in the first place.
Relying on Relatives
Contrary to the perceived conception, friends and family are not usually the best option when managing problems such as debt. In the long run it will put a strain on your relationship with some of the most important people in your life. This may also give off the impression of generally poor managerial skills and lessen your chances of seeking for fresh loans.
Avoiding Cheaper Credit Counsellors
When unable to handle debt problems personally and you attempt to pursue professional advice, it is important to approach someone candid; who will offer the best advice for a reasonably affordable fee. This ensures you do not incur more debt in terms of consulting cost should you not get the best of advices. It also allows a professional walk you through the recovery process by revising your expenditure or taking a ‘debt consolidation loan‘ at a competitive price, with very little cost in exchange for such services.
Declaring a state of bankruptcy can affect your future financial rating, having a far reaching effect on your borrowing prospects. It is therefore advisable to avoid such decisions especially when debt settlement seems like the best option for you. It is a myth that bankruptcy ruins your credit for only seven to 10 years; it goes far beyond decades.
However if you are convinced that debt settlement is the best option, it would be wise to approach a company that will offer a large, one-time payment toward a current balance in return for letting the rest of the debt slide. For example, someone who owes $20,000 on a single credit card can bring forth a one-time payment of $16,000, and in return the credit card company agrees to wave the remaining $4,000.
Source: Venture Africa