10 Wrong Ways to Cope with Debts


When you find yourself in debt, it is important to meet that obligation by paying on time and in full. Whether your debts involve credit card balances, installment loans, or money borrowed from family or friends, there are positive and negative ways to handle debt. Ensure that you avoid coping with your debts in the worst possible ways.

1. Failing to pay

Even if you can’t afford to make a full payment on your debt when it’s due, pay whatever you can on the total. When you skip payments, your creditors will become uneasy. Let them know what your situation is and when you’ll be able to make up the shortfall and resume regular payments.

2. Paying late

Always pay your debts on time. If you have trouble remembering when payments are due, create a bill payment calendar where you record all of your monthly payments and the amounts. Cross each bill off every month once you have made the payment.

3. Accumulating more debt

When you are already overwhelmed by your debt, avoid accumulating more bills. Delay moves like adding movie channels to your cable subscription, purchasing unneeded apparel or taking costly vacations until you have paid your debt down to a manageable level.

4. Ignoring collection phone calls

If you have fallen behind on your payments to any creditor, do not give in to the temptation to ignore their phone calls. Answer the phone and discuss your situation with your creditors. Sometimes creditors are able to offer solutions that will help you until you get back on your feet.

5. Failing to make payment arrangements

Occasionally creditors may be able to help you out by accepting payment arrangements that will help you avoid collection activity or a disruption of services. When you have fallen behind, contact your creditors and ask if they offer payment arrangements that will help you get back on track.

6. Using payday loans

Avoid succumbing to the temptation of payday loans. While they might seem like a great solution at the time, they are a high-interest answer to a short-term problem. Not only do you have to pay the original amount back, you will pay a considerable fee on top of it. Using payday loans is spending money you have not even made yet.

7. Borrowing from retirement funds

Some people borrow from their retirement funds when they find themselves overwhelmed with debt. While this is a viable option, you will lose money when you have to pay taxes on the amount you withdraw and penalties for borrowing from the account before you reach retirement age.

8. Taking cash advances

Taking cash advances to pay down debt is similar to using payday loans. Cash advances are often a high-interest solution that cost you more money than they are worth. Once again, you will have to repay the original amount of the advance and the fees on top of it.

9. Pawning items

You may be tempted to pawn items in an attempt to generate money to pay your debts. Pawning items is an okay solution if you are willing to sell them outright and they are items you no longer want. If you have to pay to retrieve them at a later date, you are simply spending extra money for the pleasure of buying your own stuff back.

10. Consolidating with high-interest loan

A bill consolidation loan can go a long way to help you get out of debt, but it is only a good idea if the interest is lower than the interest you are currently paying. Consolidating your bills into a loan that costs you more interest than you are already paying is always a bad idea and costs you more money in the long run.

Rather than choosing one or more of the worst ways to cope with your debts, look for positive alternatives that allow you to pay your bills without accumulating more debt. There are several options that allow you to pay debt down reasonably until you are debt free without digging yourself into a deeper hole.