Debt is one of those things where we have to seriously consider whether it can positively or negatively influence our life. Yes, that can have its good moments. You need to have debt in order to build your credit. There has to be a period of time in which you can prove that you’ll regularly make on-time payments toward debt. You should learn about the 3 biggest debt traps out there today.
Were debt gets people and the problems is that they often struggle and paying it back. They want to buy something even though they can afford it. So, they use their credit and at times it can be difficult, especially when they add on tons of interest and the monthly payments are higher than anticipated.
A lot of people do not know how to manage their debt the right way. They continue piling debt until they eventually maxed out. This is a dangerous situation that can dramatically set you back in the future. You may have a need to take out a loan, but if you have so much debt or history of not being able to pay it back, you will lose out
Let’s look at 3 debt traps you should avoid:
1) Credit Card Rewards are Debt Traps
Credit card companies often offer a lot of rewards in order to entice people to get one. Again, using a credit card the right way can be good towards improving your credit. If you go with a credit card that offers tons of rewards, it will be a long time before you see those rewards. We’re talking spending thousands of dollars before you see a single reward. Even then, they’re not good rewards that they advertise for.
Before you know it, you racked up hundreds and interest payments and that, going broke just to get a ‘free’ airline ticket your trip that you would have paid for five times over if you didn’t get that credit card. If you need a credit card, and you want to build your credit, do it the smart way. Make small payments and pay it off each month.
2) Getting a Brand-New Car
This is one of the biggest debt traps out there today. Having a brand-new car is a status symbol to the world. You may have been eyeing that luxury car for many years, but many people don’t understand exactly how expensive that is. Not only are you expected to pay full-time coverage for insurance, you’ll also be taking a loan out for many tens of thousands of dollars which carries with it many thousands of dollars of additional interest. Owning a brand-new car is a burden that you must be ready for. Wait until you’re financially secure and have no other debts. In the meantime, there’s nothing wrong with getting something used.
3) Clothing
Just like the brand-new car, the close that we swear is indicated of our status. People love to wear expensive clothing to impress. The problem with this is, you could easily spend hundreds to thousands of dollars on designer clothing. People who buy these types of clothing also are not content after they buy something expensive. They wear it once or twice and in the ready to buy something else. If you look at a lot of the current billionaires, their wearing flip-flops and hoodies, not thousand dollars suits.
