Top Debt Management Flaws

Today millions of people carry debt burden upon their shoulders. These can be house loans, credit card debt, mortgage, student loans, personal loans or some other kind of debt. Although most people make so much effort to get out of the debt trap but many of them falter on the way but it simply doesn’t mean that it’s the dead end and the trap stays permanent. One could get out of the debt jail by simply following a flawless debt management strategy. Below listed debt management mistakes can be avoided by adopting a skillful debt management strategy to tackle the debt web and make use of the debt more efficiently.

Over relying on creditor’s word

Students and professionals seem to be unaware of the existing policies regarding debt and tend to believe on what their creditors have to say. Lenders generally are in search of such kind of debtors who are not aware of the monetary policies prevailing. When you are evaluating your situation, it is advisable to do some research on your own or to seek advice from reliable alternative sources to ensure you fully understand your options and other perspectives as the loan providers have priorities different to yours.

Failing to learn about new repayment options

There seem to be changes occurring each year in the federal student loan programs. Unfortunately, borrowers are unaware of eligibility requirements and benefits of these programs and therefore, some borrowers who qualify are not actively taking advantage of these programs. Understanding the details of these and other programs is important as they can provide you significant cost savings if implemented properly.

Excessively forbearing debts

Graduates during their internship and first year of job tend to delay their repayments thinking that it’s the only option available to them. Instead they should realize that accruing interest on such non payments is not a healthy option.

Excluding oneself from tax rebates while filing tax returns

Tax returns when filed result in imposition of higher tax burdens and lack of awareness as far as the rebates on student’s loan is concerned.


  • All the debt being treated equally

Student loan borrowers often treat all of their student loans the same during repayment. Many borrowers set up a standard payment plan and use automatic debit, essentially putting repayment on cruise control until their debt is retired. The alternative to the above repayment is to implement a targeted repayment plan that lowers the interest cost of a borrower’s debt portfolio by retiring the higher interest rate loans more quickly.


  • Not opting for debt councilors

Most professional graduates neither have the time nor the resources to manage it appropriately at such a critical point in their career. Working with a trained financial professional, such as a tax accountant or financial planner familiar with student loans, is highly encouraged in order to ensure you make the appropriate financial decisions regarding student loan repayment

  • Use of emergency fund

Emergency Fund is primarily developed to manage a financial crisis. It is meant to fund an emergency. Using up emergency fund is not a wise step at all. Although you can manage the debts but it empties your fund made for an emergency.


  • Falling to the minimum payment trap

It might seem that by paying the minimum amount you are managing your debt, but the fact is that it does not help to reduce your debt burden in any way. The interests and charges keep on piling up. You must understand that by paying just the minimum payment you cannot simply get out of the debt.

  • Credit reports given no due importance

Credit reports and statements are instrumental in determining your overall debt obligations. So, if you go onto ignore your credit report and statements, you can never manage and devise a strategy for meeting your debt obligations and it will not make you any richer.


  • Credit card debt well neglected

Most of the people that have multiple debt obligations tend to neglect the credit card debts. Although it is advisable to pay off the high interest rate debt first but the amount on credit card debts keeps on piling up unnoticed. A very healthy step in that regard would be to avoid the use of credit cards by using simply cash or debit cards.


  • Inability to plan debt management

You have to be clear, precise, and accurate in your debt management. With no clear debt management action plan, you invariably end up being a loser. You suffer financial losses that could have been easily saved. One should not enter the playing arena with close eyes and proper economic planning in that regard would be highly beneficial.


  • Bad debt largely accumulated

Spending on stuff like a home theatre system or an expensive vacation trip would largely accumulate your bad debt and these unconstructive expenses would engage yourselves in debt burden. To provide relief from it one mustn’t waste the resources and utilize it to a more productive option.


  • Non budgeting

Budgeting and writing down expenses during academic life has proven to be an important way of managing the debt and it has been observed that students tend to neglect budgeting and take on things as they come which results in disastrous upcoming life. Budgeting should be stressed upon especially by the students so that their tuitions and weekends are compromised.

  • Buying while keeping future income in mind

What one would become simply doesn’t mean one should start buying and making expenses by keeping their future in one mind. It’s the present that matters and not keeping that in mind is a big debt management mistake. Buying an expensive place or car by keeping future income in mind can never be safe as if doesn’t materialize you would end up in a calamity so play safe and secure.

  • Delay in payments or simply not paying

Debt payments should be made accordingly as they become due. By avoiding or simply not paying would definitely not relax you from debt burden but it will nothing but accumulate the interest making your debt fatter than ever!

Final word:

By keeping all these flaws in mind one could effectively manage the debt and make oneself comfortable while still being in debt.


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