Debt is a landslide. You need some of these to keep your credit report glowing, but not so much that you can’t get monthly payments and spiral payments into the currency pit, and there is no repayment plan from which you can help you grab.
For you: If you retire in 2025, you need to consider 5 cities
Next Step: Warren Buffett: The Poor Wasted 10 Things
Millions of Americans are in debt, whether through student loans, car loans, personal loans, business loans, credit cards, credit cards, or other sources of high-interest debt. Given everyone’s personal financial status, you’d think they’d do better and separate myths from reality.
Sadly, this is not the case, as many debt myths are still alive and good. These are five myths that won't help you solve your debt.
Debts don’t necessarily hurt your credit score. In fact, taking on debt and managing it successfully can actually improve it. The goal is to pay your credit card bill on time (or early!) as this is the fastest way to increase your score.
On the one hand, you need to establish a credit history to get a score, so some credit card debt can be friends with your financial situation. From there, your score can be improved based on ranges like your credit history, payment history, and credit utilization.
Consider it: Will your student loan affect your credibility?
There is no doubt that building a hard-to-manage credit card balance is one of the biggest financial mistakes you can make, especially with high interest rates.
But if you manage your credit cards wisely, they can be a tool to improve your financial position in the form of reward points and other privileges. Your debt payment should work for you, not the other way around.
These privileges are a great way to get discounts or cash for everyday items, according to Natalia Brown, chief compliance and consumer affairs officer for National Debt Remedies, a provider of debt settlement and relief services.
The key to maximizing credit card privileges is how you use the card. This means payment on time and never spend more than the fees paid in full within a reasonable time or within the due date.
This is a common myth and happens to be wrong. Any financial expert will tell you that there is no legal obligation to repay the debts incurred by another person before getting married.
This will change if you place your name on the promissory notes on the loan, or add you as a joint account holder of the debt. Otherwise, the debt in your personal name is the personal responsibility of each account holder.
In short, you should pay off your debt faster before helping your spouse. Just like a plane experiencing severe turbulence, you put on your own oxygen mask before assisting others, fix your personal financial situation before bailing someone else’s debt.
This is definitely a myth. After you run out of everyone else, bankruptcy is always the last resort. A better move is to consult a company, online platform or financial advisor, which can help you pay unsecured debts every day, navigate the consolidated loans and negotiate with major credit card issuers and banks to reduce your debt burden on your behalf.
You can pay off debts, far more than you think they are. Instead of declaring bankruptcy, you can formulate and try one of these debt repayments:
Avalanche method: This is your debt repayment strategy involving repaying debt at the highest interest rate first. While you should continue to pay for all debts, this method prioritizes high interest debts, and once you have paid off the highest debt, you just need to start working on the next debt.
Snowball Method: When you pay off your smallest debt first, the strategy is the opposite of the avalanche method and then move to the next smallest debt in turn. This helps you clear debts that are easier to pay, reducing your overall faster debt amount.
Conversely, debt can be an active financial tool when used wisely. Unfortunately, debt has negatively stigmatized many people. She said this myth persists for many reasons.
“We may have seen bad experiences with our parents or people near us, lacking overall financial education, deeming credit not readily available, and not knowing the benefits of debt when properly leveraged,” she said in an email. “These stigmas are unfair because debt can be exploited by increasing wealth.”
Vance Cariaga contributed to this report.
More information from Gobankingrates
This article originally appeared on gobankingrates.com: 5 Myths about debts you shouldn't buy