Why You Need To Avoid High-Interest Debt
One of the most common reasons why people file for bankruptcy is due to high-interest debt.
Debt can be manageable while interest is low, helping you make affordable payments that fit within your budget.
But unfortunately, not all loans and credit cards are low-interest, and it’s the higher interest debts that lead to problems.
There are many reasons why people end up with high-interest debt, including consolidation solutions.
It can be a vicious circle, with those with poor credit being offered high-interest rates, increasing their debts and damaging their rating further.
There are many debt solutions that can help you avoid high-interest and help you improve your finances.
Want to know why you need to avoid high-interest debt?
Read on for further information.
Why do people end up with high-interest debt?
High-interest debt happens for a number of reasons:
- It can be the only option for those with a low credit score.
- Missed payments can push the interest rate up.
- Some lenders only provide high-interest rates.
While interest rates are clearly stated upfront, many people feel like they have no choice but to take on high-interest credit, especially if it’s the only offer available to them.
Many lenders also fail to make the appropriate affordability checks, meaning borrowers face high monthly payments they can’t afford in addition to their mortgage, rent and other expenses.
Why you need to avoid high-interest debt
High-interest debt can leave you with a long repayment term.
As the interest is so high, it can mean you’re faced with high monthly repayments that do little to pay off the debt itself.
Over time, you’ll also pay back much more than you borrowed.
If your affordability is low, then repaying a high-interest loan or credit card can leave you without much money left to cover your bills and expenses, which can push you to take on further credit with other lenders.
When debts begin to spiral, filing for bankruptcy can feel like the only solution to clearing your debts and starting afresh.
However, there are consequences that come with bankruptcy, including a long-term impact on your credit rating.
Bankruptcy is something that needs to be considered carefully before you file, and there could be alternative options available to you.
Alternative solutions for dealing with debt
If you’re struggling to repay your debts or your interest is too high, there are other options you could consider to help you clear your debts and get your finances in order.
A debt management plan could be one way of negotiating with your lenders, and potentially reduce or eliminate the interest on a loan.
A consumer proposal is another alternative, which could help you negotiate with creditors and make affordable repayments over time.
It’s important to seek advice about your debt problems, and if you’re facing unaffordable high-interest repayments, get in touch today.
Through a Licensed Insolvency Trustee, you can get the help you need to put an end to your debts and get your finances back under control.
To speak to one of our team today, call (877) 879-4770.