You’re Doing It Wrong: 6 Debt Repayment Mistakes You Are Probably Making

Getting into debt is easy, but paying it off can be extremely hard. It takes a considerable effort and a long-term commitment to working your way out towards being debt free. There are so many common pitfalls most people fall into when it comes to repaying debt that sometimes you don’t even realize you are making a mistake.

According to CCS, cited by globalnews.ca, 66% of Canadians believe that they know how to handle their financial situation. However, there is still a big percentage that is walking blindly in this area.

To help you reach your goal of being debt-free, here are six typical mistakes most people make when paying off their debt.

1.      You Fall in the Trap of Debt Consolidation

Let’s face it – it’s tempting to go to a debt consolidation company. But is it wise? Not so much. Usually because their goal is to take your money and run away. If that is not the case, though, they will most likely cost you more than your initial debt and will additionally damage your credit rating as well. A better option is to communicate directly with the creditor.

2.      Not Having a Strategy In Place

If you put it on paper, then it’s going to be harder to ignore or forget. It is important to have a clear goal and a plan of action. If you do not approach this matter in the right way, it will take a long time to repay that debt. And, considering that the average Canadian family has a debt of around $100,000, this is a sign that people aren’t looking at numbers very carefully.

3. Not Opening the Envelopes from Creditors

One of the most common mistakes most people make is avoiding opening the envelopes from creditors. Not seeing your bills won’t make the debt go away – it will only prolong your distress. If you actually see the numbers, then you might be more motivated to pay.

Even more, you should be on the lookout for mistakes made by the company. You do not want to have to pay more than needed. If this is the case, let the creditor know right away. Also, every three months you should check your credit report to make sure everything is fine there as well.

3.      You Spend Too Much

Do you know what the golden rule of paying back debt is? Saving money.And if you spend too much, you’ll definitely not manage to save any. To avoid this, create a monthly budget that is neither too rigid, nor too relaxed so that you can stick to it. Of course, sometimes spending a bit more on some things won’t throw your budget off the wagon, but if you constantly adopt a lifestyle that means living beyond your means, then you are on the path to failure.

4.      You Pay the Minimum

And it’s understandable why you choose to do so – it’s a good way to keep yourself on the surface while not spending so much. But is it a good idea? If you don’t want to pay huge amounts of money in interest over the years and don’t want to pay until you’re 90, then no, it’s not such a good idea. The goal is to finish repaying your debt as fast as possible, and the only way to do that is by paying as much as possible every month.

5.      You Keep Adding Debt

The safest way to make even your grandchildren pay for this debt is to add more debt.To prevent that, you must put a stop on whatever purchases with credit loans or credit cards you have in mind. The classic mistake is to pay thedebt by making another debt, and this will ultimately lead you toward outrageous sums in interest.

It is known that Canadians have become a bit too comfortable with debt, either because of necessity or because of habit. According to one study, 35% of Canadians list “impulse shopping” as the number one reason for consumer debt.

Do you have a plan for repaying your debt? Have you identified yourself with any of the situations above?

Author Bio: Ben Rogers, Web Content Manager for Assiniboine Credit Union.