There are hundreds of common debt myths, ranging from debt management myths to debt-consolidation myths and myths about credit card debt.
Here’s a list of five common myths about debt so that you can guard against them:
1. One of the most common debt myths is that bankruptcy is the easiest way to escape of the debt trap and start fresh. The truth, however, is entirely the opposite. Rather than being an easy way out of a debt-ridden life, bankruptcy is probably one of the most troublesome phases in anyone's life. It can have a long-lasting impact on everything related to your life, including your future income potential and credit needs. These things, in turn, can put you into another debt trap.
2. Another debt myth is that bankruptcy will ruin your life and should not be considered under any circumstances. This myth about debt says just the opposite of the first debt myth mentioned above. While bankruptcy is certainly not a good option, it can be the only option in certain cases. If you have consulted a good credit counselor and have been told that bankruptcy is the only alternative, you should choose this option. After all, going bankrupt could still be better than having nothing financially to support you.
3. The 3rd myth about debt is that you can drastically cut down your debts through debt consolidation. This is not necessarily true. Though it can help to a certain extent, debt consolidation can, at times, increase your overall debt. Hence, it is advisable that you do not blindly opt for debt consolidation. Rather, you should calculate all the costs involved with the process for proper debt management.
4. Some people believe that debt management companies have tools to erase your debts. This is no more than a fantasy. You will come across such claims made by debt management companies on television or in newspapers. Remember that nothing comes without a cost, and if something appears too good to be true, it probably is. Even if some debt management companies manage to move you out of your debt trap, there are chances that your credit score would be affected badly.
5. There are also numerous myths related to credit card debt. You may hear people saying that it is fine to pay the minimum amount due and that one doesn't have to pay the entire amount. By not paying the total outstanding amount, you fall into a debt trap, as the bank will start adding charges to the outstanding amount. These charges keep on adding up every month until you end up with a large debt.
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