Avoid These Common Mistakes if You Have a Lot of Debt

debt mistakes

For many Floridians, debt is just a part of life. Some can manage it well but for others, it cripples them financially. There are many things you can do to help when you are in debt, such as contacting the creditor to discuss more manageable payment arrangements. However, there are also many mistakes that can be made that can make the situation even worse. Below are some of the most common mistakes people make when they are in debt. It’s important to understand what they are, so you can avoid making them yourself.

Ignoring Your Debt

Facing mountains of debt is simply too much for some to bear. They don’t know how they’re going to pay it, so they continue to ignore creditors when they call and fail to address their debt at all. This is a big mistake.

The fact of the matter is that you’re going to have to address your debt at some point. If a creditor files a lawsuit against you and a judgment is issued in their favor, they can garnish your wages or take other measures to recover their debt. By that time, the debt will have become even worse, because interest has compounded while you’ve been ignoring the debt.

The best reason to address your debt is that it is empowering. When you confront your debt and your creditors, you take back control of your financial future. That is often motivation enough to pay off even more debt and get back into a good financial position.

Not Understanding Your Rights

Taking control of your debt is much easier if you understand what your rights are during the debt collection process. For example, a creditor generally only has four years to attempt to collect the debt from you. If they don’t take action, such as filing a lawsuit, before that time, the statute of limitations will expire and they can no longer attempt to collect the debt.

It is important that debtors are aware of this right, and many others. If the statute of limitations has expired, a debtor can tell a creditor so and request that they no longer contact them. If the creditor does not comply, they are in violation of the law and the debtor can take action against them.

Even if the statute of limitations runs out on your debt, it’s still important you pay it as soon as possible. Although the creditor can no longer contact you, failing to repay the debt will wreak havoc on your credit score.

Rack Up Credit Card Bills

When you still have funds available on your credit card and you’re also under a large pile of debt, it can be tempting to use the cards to pay off those debts or make other purchases. However, it’s imperative that you don’t do these things. Although credit cards can help get you out of a sticky situation now, adding on more debt will only make things worse for you further down the road.

Credit card debt can quickly become a vicious cycle, particularly when it involves high-interest rates on revolving balances. Keep one card for emergencies, and only use it for actual emergencies. Cut the others up, or put them in ice to remove the temptation to put more purchases on them.

Failing to Create a Plan

Thinking about your mountain of debt and how you’re ever going to pay it off is overwhelming. In fact, it’s too overwhelming. However, when you have a plan, you can look at the pile more confidently, knowing exactly how you’re going to tackle it. There are two approaches most people use when trying to pay off their credit card debt. These are the snowball method and the avalanche method.

When using the avalanche approach, you pay off the credit cards with the highest interest rates first. This is so that you can save money by not paying interest on these cards for very long. Once one card is paid off, you then start paying off the debt with the next-highest interest rate. You continue doing so until all of your debts are paid off.

The snowball method works very differently than the avalanche method. With the snowball method, you focus on your smallest balances and try to pay them off first. Going this route, you will pay more in interest in the long run. However, this method has a psychological gain. When you make small victories, you have more incentive to move forward for continuing success.

Going at it Alone

No one wants to admit that they are drowning in debt, even to their family and closest friends. This doesn’t need to be the case, though. Most people carry some type of debt, and many even understand what it’s like to get behind on payments and think that you’re never going to catch up.

Talking about your debt to friends and family can actually help you feel better about it. There is something comforting about discovering that so many of your loved ones are going through, or have gone through, the same thing. After talking to family and friends about it, they may even be able to help you out. If not, a credit counseling service can help. These agencies don’t charge anything for consultations and can direct you to services and resources that can help you get a grip on your debt.

Failing to Speak to a Florida Debt Defense Attorney

One of the worst mistakes a person can make when trying to deal with a mountain of debt is not speaking to a Fort Lauderdale debt defense attorney. This is particularly true if a creditor or debt collector has already filed a lawsuit against you. If you are suffering from significant debt and creditors have taken action or have been harassing you, it’s important you speak to one of our attorneys at Loan Lawyers. After reviewing your case we can determine whether a creditor is violating your rights, and defend you in the event that a lawsuit is filed. If you have debt, we’re here to help. Call us today at (954) 523-HELP (4357) for your free consultation.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.