Credit Card Debt Loans

Is debt loan always a bad thing? Well, it depends on what you are borrowing for. If the borrowing Is an investment in your future, it's worth it. Borrowing to buy a house or to send your children through college are usually smart borrowings. But what about your credit card borrowings for consumables like clothes or to book a ticket for a vacation? That's spending now and repenting later given that most of us have to work for a living. Or for that matter buying a car that you cannot afford. Models are going to be out every year and no matter how hard you try, there will be friends and relatives with better cars than you.

Are you heading towards a debt loan trap? You may be already soaking in loans. Are you heading into a situation where most of your income will go towards paying off loans? A heavy debt loan burden will obviously cause you financial discomfort, but it could also increase your stress levels. Given below are some pointers of an emergency situation that may require immediate remedial measures on your part.

Is your reputation being affected by debt or loans?
Are you distracted from your daily life because of debt or fear of creditors?
Are you giving incorrect information to obtain debt loans?
Are you delaying payments to creditors by making false promises?
Do you borrow money to buy consumables or make investments without sufficient thought about the interest rate being charged?

How do you fall into a debt trap? Credit cards and other lenders rely on the fact that an average adult is not financially savvy. You pay interest rates of 18 per cent or higher on your credit card purchase but because you need to make a low monthly payment to the issuing company every month you don't realize that you are paying that much extra to buy a shirt/trouser or anything else on a credit card. And credit cards retain your custom by reducing minimum payment requirements and relying on the fact that those high interest rates will not pinch you if they stretch over a period of time. That's how other lenders work too. They take back a small percentage of the loan on a monthly basis over a number of years so that you don't feel the pinch in one shot. The problem is that when you accumulate a number of these loans, paying back each lender on a monthly basis adds up and starts to reach a level where most of your income goes in paying back loans.

Here are a few rules to follow to avoid falling into a debt trap.

Pay off your credit card bill in full every month. If you don't have enough, don't spend.

Budget and save for emergencies and those sudden expenses.

If you have taken loans sell off those investments that don't have any tax benefits like stocks in your portfolio or a fixed deposit with a bank. No matter what interest a bank gives you, it cannot be higher than the interest you pay on credit card purchases, car loans and other consumer goods bought on credit.

The unpleasant side of delaying and defaulting on loans Legal remedies for collecting on a delayed or defaulted loan are cumbersome and time consuming. So finance companies and other creditors sometimes use dubious methods to collect on such loans, including use of physical force. How do they get away with it? Well, they use the excuse that they have assigned the collection of a loan to a collection agency and they have no control over how it does its work. And since the government looks the other way while borrowers get a raw deal, creditors get away with just about any method of collection.