When it comes to debt, the majority of people needing debt relief avoid it because they don’t know what to do or where to start. Others might just be ashamed or not ready to face up to what they must do or how much debt they’ve created. However, the only way to take back control and truly deal with your debt is to do something about it.
Plenty of people end up in situations where their debt has gotten out of control, and they aren’t quite sure how they got there. Several things can go wrong, aside from your bills going unpaid, of course, and you’ll need to know what to expect and how to deal with it. If you don’t address your debt, you could run into issues like those below, or find yourself dealing with equally difficult circumstances.
Three Bad Consequences of Not Controlling Your Debt
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If you can’t keep your debt under control, several different things could occur. Of course, it all depends on the types of debts you are racking up and how much you owe, but there are consequences and eventually, they will catch up to you. Some people think that they can just write off their debt and start fresh like nothing happened, but it’s not really that easy. It takes a lot more work, and in the meantime, it can damage your life and your finances in several ways.
- Poor Credit Score
When you don’t pay your debts on time, regardless of what type of bills they are, they may impact your credit score negatively. Credit card bills, rent or mortgage payments, and installment loans (like vehicle loans) will all need to be paid on time or they will be reported to the credit bureaus. Some rental companies and landlords might not report to your credit, but just about every other creditor that you have will.
- Loss of Home or Vehicle
In a worst-case scenario, you could ultimately lose your vehicle or your home if you are unable to keep up with your debts. Sometimes, people get so far in over their heads and they don’t know where to turn. They put off paying their bills thinking they have time, or they just avoid it because they don’t want to deal with it. Then, they end up having their vehicle or home repossessed. If things can even be salvaged at this point, it will take a lot of recovery, payment of fees and associated costs, and more.
- Inability to Borrow Money
If you aren’t paying your bills or you have a lot of debt built up, you could find yourself unable to get loans for things that you need. For example, if you are trying to get car financing and you have old credit accounts that have gone unpaid that are damaging your credit score, it could keep you from being approved or cause you to have to pay a much higher interest rate if you are approved. Although credit is something that you should only use when necessary, it’s helpful if it’s available to use when you do need it.
How to Deal with Your Debt the Right Way
The first thing that you need to do is stop ignoring your debt. Sit down with your bills and your credit report (which you can get for free once a year, by the way) and make a list of everything that you owe. That’s going to be scary, and it might even be a bit overwhelming. However, it’s going to help you get started and it might even prove to be less intimidating than you thought.
Once you have a list of your debts, divide them into an order of priority. The debts that are current, such as your utilities, phone bill, or mortgage payments, should be addressed first. These are ongoing expenses, and you need to try to keep up with them the best that you can. Credit card payments, old accounts, and collections accounts should be secondary on your list. They are important, but they’re not as important as being able to keep your electricity on or keep a roof over your head.
Feel free to talk to your creditors and ask them if there’s anything that they can do to assist you. In these times more than ever, lenders and creditors are often willing to help you prevent serious defaults and find ways to avoid not being able to pay. This isn’t always the case, but if you don’t ask, you’ll never know.
Can You Write Off Debt?
Some people ask about “writing off” debts and how to just get rid of them for good. Unfortunately, that’s not generally an option. The stories that you hear about people who write off debt, government scheme or otherwise, are generally made up by unscrupulous companies that want to convince you to use their debt relief services or whatever else they might be selling.
Some companies may be willing to negotiate your debts and settle them for less than what you owe—that’s why you need to take the time to talk to them. However, no one is going to “erase” your debt like some kind of magic do-over, so don’t waste your time on that.
The Bottom Line
Take the advice of others and just deal with your debt. You do have a lot of options for dealing with debt, but it starts with owning up to it and taking the time to face your reality. You don’t have to deal with loan sharks or fight the battle of paying off all your debts on your own, either. With the resources available online today, you can easily take care of your debt and do it on the up-and-up. Just don’t be afraid to ask for help and make sure that you’re not avoiding your debts any longer than necessary. You might not be able to pay them all right now, but you will be able to pay them if you take back control.