5 Common Debt Traps To Avoid

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Since the financial crisis took a hold more and more of us are receiving messages from consultants, banks and private businesses offering to help us get out of debt and our finances in order. Yes these programs may seem like a great idea but in fact could actually result in us having to deal with even more debt than we had before. So below we provide some advice with regards to how to avoid 5 common debt traps that other people have had to deal with.

Trap 1 – No or Low Interest Rate Credit Cards

Many banks are actively soliciting us each day with offers to open a new credit card account with them. In most cases should payment be late or not received then the initial offer will no longer be valid and you find yourself be charged extremely high rates of interest on what is owed.

Trap 2 – The Balance Transfer Game

A large number of credit card companies are trying to entice customers to transfer the balance of their present credit card to theirs by giving them a much lower rate of interest on the new one. However if you do take out such a card and then find you cannot stick to their restrictions then you will once again find yourself in more debt than you were before.

Trap 3 – Taking Out A Contract With A Debt Consolidation Service

Many of these companies will promise that they will work with your creditors in order to help you sort out your debts. However do be careful as a lot of these will change the terms of your plan without any prior notification as the creditors have decided to change the terms of theirs. Plus you must also understand that some of these companies will ask you to pay quite a big fee in order to enter their program and this could only lead you to having more debt to contend with.

Trap 4 – Payday Loans

There are numerous companies today who offer such loans and who prey on those who need money quickly without too many questions being asked. However the major problem with using such loans is the amount of interest you will be expected to pay. On average the interest rates charged by such companies tend to be between 200 and 400%. The problem with this one of our 5 common debt traps is that even if you use such a service once you may find it very hard to recover from it in the future.

Trap 5 – Buying During The Sales Using Credit

Okay buying when the sales are on is very cost effective, but if you use a credit card and you aren’t actually able to pay back everything you owe the following month it can prove very expensive indeed. Remember you will then be charged interest over the coming months on the money that you owe. So turning what you thought was a bargain into yet another of the 5 common debt traps people are faced with.

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Topics: Bankruptcy | Comments Off

Tags: advice, bankrupt, Bankruptcy, debt, Debt Consolidation, debt management, debts, family, Finance, financial help, home, iva, ivas, tips

Article Citation
MLA Style Citation:
Banks, Cheryl "5 Common Debt Traps To Avoid." 5 Common Debt Traps To Avoid. 7 Apr. 2011. uberarticles.com. 8 Apr 2012 <http://uberarticles.com/finance/bankruptcy/5-common-debt-traps-to-avoid/>.

APA Style Citation:
Banks, C (2011, April 7). 5 Common Debt Traps To Avoid. Retrieved April 8, 2012, from http://uberarticles.com/finance/bankruptcy/5-common-debt-traps-to-avoid/

Chicago Style Citation:
Banks, Cheryl "5 Common Debt Traps To Avoid" uberarticles.com. http://uberarticles.com/finance/bankruptcy/5-common-debt-traps-to-avoid/

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