We think a lot of people exaggerate how serious the issue of debt is. Don’t get us wrong, debt can be an avalanche of issues building up that seem completely inescapable. But, that’s usually due to the fact that those facing debt misunderstand the situation. It’s these misunderstandings that lead to more dangerous situations such as borrowing more to pay off an amount owed. Or simply avoiding the issue completely. By understanding the situation, you will be able to handle it and effectively deal with the problem. That’s what we’re going to help you with on this post.
Here you’ll find some common fallacies about debt. By figuring these out you will be in a far better position. So, if you ever need to deal with debt in the future you’ll know what to do. Or, if you’re already in debt right now you should be able to escape it. Let’s start with one of the biggest and most dangerous false beliefs.
Debt Can Be Resolved By Doing Nothing
We know that a lot of people have been lulled into a false sense of security when owing money. They think that if they owe money, it can be paid back whenever they feel like. They completely forget about the building interest on their loans, and that’s not the only issue. They also think that once their debt builds to a high enough level, there is an easy escape.
The mythical rescuers in this situation often vary depending on who you talk to. Some people believe that if you borrow and don’t pay the money back for long enough, your debt is wiped clean. This doesn’t happen. Others say that when your debt gets to a worse enough state the government steps in. Again, this is not the case. We think this idea has been derived from a misunderstanding of the term bankruptcy. When you file for bankruptcy, your debts will be wiped clean. This is true. But, only if you literally do not have any money left to pay back what you owe. Filing for bankruptcy means you will have nothing and will have to start over from scratch. At that point, you will need to rely on either friends or family.
To us, this doesn’t sound like a winning situation. It sounds like a worst-case scenario and that’s because it’s exactly what this is. So forget about these mythical easy options to getting out of your debt. They are not what they seem.
Another mistake people make, is believing that some forms of debt are acceptable. They even go as far to describe them as a fact of life. While, some form of debt is necessary to progress in life, you still need to work to pay this off. You need to pay it off as quickly as you can so that you can avoid a lot of added interest. The type of debt we are talking about are student loans, home loans or even business loans. These are loans you take to advance your life, but they still need to be paid. You need to work out a plan to pay back the loan little by little.
Borrowing More Is Bad
Many people will tell you that the last thing that you should do when you owe debt is borrow more money. Okay, in simplistic terms this makes a lot of sense. But, what if the source of loan you currently own as a huge interest rate. Perhaps you have mistakenly taken out a payday loan without checking the interest. Those can cost you a fortune even if you only borrowed a couple thousand. In this special situation, it could be beneficial to take out another loan with a better company. A lower interest rate could end up save you a lot of money. You won’t cut what you owe but you’ll stop the rate that it’s building.
Debt Relief Companies Are Scammers
We know a lot of people think that debt relief companies are scams. We get why as well. You’ll usually see them on daytime TV with promises that seem too good to be true. However, what you should understand that the scams are a few bad apples, not the whole tree. You just need to find the right company that does care about helping you recover.
We recommend you look for a business offering a debt consolidation service. This service is useful if you owe a lot of money in different areas. They will pay off all your debts and then you will owe them the money. One large sum that you will be able to manage a lot easier than multiple debts.
You’ll Need A Lawyer As Soon As You’re In Debt
This just isn’t the case at all. As we have mentioned, there are different types of debt and some are more manageable than others. Typically, you will only need legal help if you think you owe an amount you won’t be able to pay back. Even then you might be jumping the gun. You should first speak to a financial planner. They will help you figure out what assets you can use to pay off the debt. They might also be able to help you formulate a plan to pay back the money at a reasonable rate before the interest grows out of control.
If a financial planner can’t help you figure out how to pay off your debt, you can then consider speaking to a lawyer. It’s at this point that you will start to think about filing for bankruptcy.
But we hope you now realize if you understand the situation you should never reach this stage. If you take the right steps you’ll be able to recover before you lose everything. And don’t forget if you borrowed from a company offering illegal loans, they are the ones to blame, not you.