4 Common Mistakes to Avoid When Paying Off Debt – What to Know

Paying off debt is a daunting process for many people. If you have to pay off a huge amount, you may be tempted to find alternative ways to shorten the process. Unfortunately, these methods will only put you into further debt in the long run. Here are four mistakes that you must avoid in order to live a life without debt.

Not preparing for emergencies

Don’t make the mistake of forgetting to put money into an emergency fund to pay off your debt faster. If an emergency occurs, it will be difficult for you to pay for unexpected medical expenses or car repairs. In such a case, you may end up borrowing more money from family or friends. Worse, you can end up taking a loan or pull out quick cash using your credit card. Having enough money in your emergency funds help you avoid such pitfalls.

Getting a home equity loan

Taking a home equity loan to pay off your previous debts can be appealing. It gives you a more organized way of dealing with your balance because you are being charged under one interest rate. While this looks good up front, you must remember that you are still increasing your secured debt to pay for unsecured ones.

In doing this, you are only restructuring your debt and not reducing it. Failing to pay the home equity loan may result in you being evicted from your home. You can even end up paying more if you use the home equity to pay bills or debt that has lower interests. More information about personal debt and your home can be found by clicking here.

Taking money out of your retirement savings

This undertaking is risky because you are taking money from a fund that will secure your future financially. Likewise, taking money out of this fund removes the opportunity to save more through compound interest. Additionally, you are still required to pay the loan with interest, giving you no gain.

Falling for the debt relief scam

Do your research and be careful about which debt relief company you choose.  There are companies that may cause more harm than help.  DebtHelpers.ca proudly boasts an A+ rating with the Better Business Bureau.  Please read our customer testimonials.

Paying off current debts without taking additional loans is the best way to deal with the debt. Remember, getting out of debt doesn’t happen overnight. Avoid risky shortcuts and if you choose a debt relief professional, make sure you are educated on their services before agreeing to anything.

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