Do You Make These 7 Debt Mistakes?Credit:


Debt is a problem that many people face.  We live in a society that revolves around easy credit and conspicuous consumption.  We are expected to have debt and few people are ever taught as children the dangers of borrowing too much.  Many people today find themselves so deep in debt that they feel they may never get out.  Getting out of debt may seem impossible in some situations but for many people the problem is compounded by continuously committing the following 7 mistakes.  Avoid them and you will be well on your way to solving your debt problems.

Credit Cards


Get Out of Debt by Avoiding Credit CardsCredit:

Credit card debt, also known as consumer debt, is one of the largest forms of liability in our modern society.  One problem with credit card debt is that it is usually associated with outrageously high interest rates.  Credit card companies also tend to hit their customers with high fees at every available opportunity.  The main problem with credit card debt, however, is the mentality that comes with owning one.  If the money is available, many people have trouble not spending it.  The best route to getting out of credit card debt for most people is to cut up their cards and throw them away. 

Many people have trouble with this solution and cite credit cards as a way to handle unexpected emergencies.  They is just excuse for not cancelling your cards.  A better way to prepare against unexpected expenses is to place money into a high interest online savings account.  Because most online savings institutions have a two to three day transfer time, you will have money ready in case of an emergency, but not immediately on hand where you’ll be tempted to spend it.  In such an account it will also earn you interest which can be saved or spent on other expenses.

Pay Day Loans

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Pay day loans are one of the worst financial options on the market.  In addition to charging interest rates that would make credit card companies blush, they often require collateral in the form of car titles or other valuable property.  If you don’t have the money to cover your expenses this pay period, what makes you think that you will have enough to cover them next pay period along with the pay day loan?  Using these services is a good way to lose valuable property such as a vehicle and is just about the last step on the way to bankruptcy.  The best way to avoid this mistake is to not accept pay day loans!

Car Loans

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Car loans can go both ways.  If a low interest loan is found for a used vehicle that is a absolute necessity for transportation to work or school it is moderately acceptable to take it.  However, money should never be borrowed for the purchase of a new car.  New cars depreciate drastically the minute that they’re driven off the lot.   This means that you immediately owe more money than your vehicle is worth.  In addition, new car loans usually have very high interest rates.  If you don’t own your vehicle outright, the lender who gave you your loan will also likely require that you purchase full insurance coverage which can be very expensive on a new car.

The best way to avoid this mistake is to not purchase a new car if you cannot afford to pay cash for it.  If you are in debt and do have the cash it should instead be used to pay off the loans you already have.

Minimum Payments


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Another mistake that many people who have debt make is that they continually make minimum payments.  These are the type of customers that lenders dream about!  Making the minimum payment on a loan usually results in somewhere between ninety and ninety-five percent of the payment going towards the interest with the remaining paltry sum going to pay off the actual debt.  Using this system, lenders are able to collect payments for years and in many cases decades.  All the while growing they grow rich off of the interest.  The best way to avoid this mistake is to pay as much on your monthly debt bills as you can reasonably afford.  Not only will it save you years of monthly payments, it can also save you many times the value of your loan in interest over the long term.

Late Payments


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Making late payments is another cardinal mistake for those in debt.  In addition to incurring high fees, late payments increase the amount of interest you have to pay in the long term and also drastically reduce your credit score.  With a lower credit score your lender may choose to increase his interest rate and the amount paid in fees for future delinquencies.  Each late payment is another step deeper into debt both now and in the future.  To avoid this mistake be sure to pay your debt bills on time every month, even if it means going without in other areas of your life for a while.

Ignoring Collection Agencies


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Many people in debt already have late payments and loans that have been sent to collections agencies.  The job of these agencies is to collect the back payments and to help the borrower to return to making timely payments.  The important thing to remember is that they are not out to get you personally and that the best thing for their business is to get you back on regularly scheduled payments.  Always take collections calls and respond to mail notices in a timely manner.  Most companies are very understanding when it comes to tough financial situations and many times will stop the calls if even a small amount of the payment owed is made.  They may also be willing to reduce monthly payments for a period of time in order to keep the loan out of default.  Just be sure to get back on track with your payments as soon as possible.

Taking on More Debt


Getting Out of Debt by Not Taking on New DebtCredit:

This is one of the most common and serious mistakes that people in debt make.  The justification is usually:  "If I already owe thousands of dollars, what’s the big deal of borrowing a few hundred more?"  This is the type of thinking that created the debt problem in the first place and compounding the issue by taking on more debt is a step in the wrong direction. 

The best way to avoid this mistake is to make paying off your debt your number one priority.  Eliminate the temptation to use credit cards by cancelling them.  Don’t visit pay day loan facilities and definitely don’t take new car loans.  Be sure to pay your bills on time and with more than the minimum payment.  This will allow you to avoid costly fees and higher interest rates now and in the future.


The decision to get out of debt is one that only the individual can make and it must be made a priority if any success is to be had.  By avoiding the seven debt mistakes in this article, anyone can find themselves quickly moving in the right direction for getting out of debt.

Dave Ramsey has helped thousands of people to become debt free and live financially sound and prosperous lives. His no-nonsense approach to getting out of debt is proven and can help anyone who has debt, even those who are at the point of bankruptcy. If you're looking for advice on how to get out of debt and stay out, then "The Total Money Makeover" is for you.