5 Mistakes to Avoid When Dealing with Debt
Nobody wants to be in debt, which is why you’ll be willing to do anything to climb out of the hole you’re currently in.
While your desire to build a brighter financial future is commendable, it can cloud your judgement and result in poor decisions that will only make matters worse.
Here are five common mistakes that debtors fall victim to.
Avoid them at all costs.
We’ve all heard the saying “robbing Peter to pay Paul” and while it may seem a good strategy on the face of things, opening a new line of credit to clear a different account is often ill-advised.
After all, it would only take one unforeseen issue (job loss, home fault, etc.) to leave you with two unpaid accounts.
Once you have compound interest accumulating on several accounts, it’ll feel like you’re getting nowhere.
Consolidation plans can be used, but they should not require additional borrowing.
Using A Cosigner
Cosigners offer you a chance to gain a line of credit even when lenders have previously turned you away.
However, they pose a number of problems.
If you were to fall behind on the payments, the cosigner will be expected to pay the costs.
When it relates to a car, taking over the remaining debt allows the cosigner to claim ownership of the vehicle too.
The way it changes the dynamic of your relationship means this is a bad move.
Besides, the purchases made with a cosigner aren’t needed to escape debt.
Cashing Your RRSP
If you have money tucked away in an RRSP account, you may think that this is the perfect source of emergency funding.
In reality, this will only delay your financial problems, causing major stress in later life.
Besides, if your financial situation spirals out of control, filing a consumer proposal will allow you to keep hold of your RRSP savings.
So, it makes little sense to clear some debts with these funds when you’re still destined for insolvency.
As far as your debt repair tactics are concerned, your RRSP is off-limits.
Not Addressing The Source Of Debt
When you find yourself in debt, it’s important to accept that it didn’t happen by chance.
Whether it’s due to reckless spending or unforeseen circumstances, such as medical bills, you must identify the reasons for your troubles.
By monitoring all expenses, you can focus on making habitual changes that actively enable you to build a financially stable future.
After all, escaping debt is futile if your lifestyle leads you back into the hole.
Repeat the same processes, and you will see the same results. Fact.
Using The Wrong Help
When you feel overwhelmed by debt, facing the journey alone is never the answer.
However, using an unlicensed financial advisor is equally damaging.
Even if they have the right intentions, the gaps in their knowledge could cause you major problems.
A licensed financial advisor or insolvency trustee is the only person truly capable of helping you turn your fortunes around, especially if legal proposals are required.
BankruptcyCanada can provide the debt relief services you need to thrive.
To find out more, call us now.