Avoid Making These Common Debt Relief Mistakes Made by Consumers
“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”
Debt relief mistakes lead to bigger financial problems. The programs such as credit counseling, debt settlement or debt consolidation can often bring welcome relief, structure, and strategic planning to your personal financial situation. But this is only possible if you choose the right one.Some of the biggest mistakes someone can make is to leap into a
Some of the biggest mistakes someone can make is to leap into a debt relief program without researching and thinking it through thoroughly. There are many different types of programs and multiple providers. Many give good advice, a good plan for one person may become a disaster for another. You can avoid falling into common debt solution traps by understanding these five common debt relief mistakes.
Not Knowing the Difference Between Debt Relief Programs – Debt Relief Mistake #1:
A debt relief mistake that’s more common than you’d think is confusing the different types of programs. Credit counseling, usually promoted by credit card companies, will not always address debts such as medical bills or personal loans. The focus of good credit counseling companies is strategic, with an eye towards helping you get back on track.
Debt settlement, on the other hand, has a different strategy in that it attempts to create a program for setting aside funds to negotiate settlements on all bills. Lastly, debt consolidation is a strategy of taking out one large loan to pay off multiple smaller ones.
It’s extremely important that you understand the differences between debt relief programs. This will help you choose the solution that will fully address your needs and meet your expectations.
Automatic Payments – Debt Relief Mistake #2:
Bill collectors often will pressure you to sign up for an automatic payment. This is how they deduct an agreed to amount from your account each and every month. It is rarely advisable to let someone you owe money have access to your bank account. Unless you have a large account balance; you risk becoming overdrawn when that automatic withdrawal posts, thereby causing bank fees and potential problems with other creditors.
Credit counselors and other debt relief companies may even advise you against this while encouraging you to allow them to do the exact same thing. It is usually best to stay in control and on top of your own account – without outside assistance. If you’re able to stay on top of paying your bills and can remember to pay them on time each month, you should usually do so.
Cutting Up All of Your Credit Cards – Debt Relief Mistake #3:
Are you considering “cutting up” all of your credit cards? Instead of canceling all of them, have a plan and go about it strategically. Cancel the highest-interest cards first and keep one or two cards that you continue to pay on a timely basis. Usually, these will be cards you have had the longest period of time… open lines of credit that you have had for several years will continue to improve your score month after month.
This is one of the biggest debt relief mistakes promoted by many “so-called financial gurus”. Doing this leaves you with no available credit, and it gives you fewer options when negotiating payments. Another downside of canceling your cards will be reflected on your credit score. If you are trying to improve your credit score, canceling your credit card will do the opposite. Even if you continue making payments on the balance on a timely basis— it will still seriously hurt your credit score.
Don’t fall for the “Non-Profit” Claims of Some Debt Relief Companies – Debt Relief Mistake #4:
Some debt relief agencies have non-profit status, which in reality is little more than an advertising ploy in some cases. Consumers are more likely to see that non-profit status, and believe, incorrectly, that the agency will charge lower fees. In fact, the non-profit status is meaningless. Choose your debt relief agency by other factors, including their track record, fee structure and success rate, as well as their willingness to work with you and present you with a variety of options.
Letting Bill Collectors Change Your Plan – Debt Relief Mistake #5:
Debt collectors will often attempt to talk or harass you out of a debt relief or consolidation plan. Bill collectors are often rewarded by how much they collect. They will not easily take no for an answer. Pay Me First! They’ll try their hardest to convince you to deviate from your structured plan. They may even threaten you and attempt to bully and harass you. Stand firm. Do not be swayed, and then continue to act according to your original plan and with the support of your debt relief partner.
Don’t fall into these debt relief mistakes in the confusing world of debt management. The right debt relief program and a good strategy…. plus the determination and willingness to stick to your plan can achieve the debt relief you seek.