The Worst Mistakes You Can Make When Trying To Get Out Of Debt

Paying off debt is a noble goal that will allow you to have financial freedom. From auto loans to credit cards, it’s easy to rack up thousands of dollars and become a slave to the debt. To have a smooth process when repaying each account, there are a few mistakes to avoid in the process.

Paying Off Accounts in the Wrong Order

You may be tempted to tackle an account that only has a few hundred dollars left on the balance, but it’s important to pay off the accounts that have the highest interest rate. This will allow you to pay less in interest until you’re completely debt-free.

Avoid Making a Budget

Without creating a proper budget that you can follow, it’s easy to become sidetracked when trying to repay your debt or even paying off more than you can afford for the month. By creating a budget and determining how much you can pay with each paycheck, it’ll make it easier to have a realistic time frame of when you’ll be debt-free.

Repaying Debt with a Home Equity Line

Many people can become desperate to repay their debt to the point of using a home equity line to obtain the money. This is a risky step that is simply trading one debt for another and should be avoided.

Closing Accounts

You may feel accomplished after repaying a credit card account and likely want to close the account to prevent getting into debt, but doing so can damage your credit. Closing certain accounts that have been open for several years can reduce the time frame of your credit history and make you less credible to lenders.

Mortgage Check-Up

While paying off your accounts, it’s also important to get a mortgage checkup to determine how well you’re managing your debt and any areas that can improve. You may want to consider paying more each month or even going through a different program to fit your financial situation.

Avoid Negotiating Interest Rates

A common way that many people spend more than necessary on interest rates is failing to negotiate the terms with lenders. Don’t be afraid to ask for the lowest rate possible with each credit card company.
When you’re ready to get out of debt and avoid hefty fees, there are a number of mistakes to avoid while making progress. It’s important to have a clear understanding of all your liabilities so you can gain control of your finances. It’s vital to have a specific plan established to guarantee success and long-term financial freedom.