In this contemporary economic world, there is a huge list of people who cannot face the pressure of financial crisis and tend to file for bankruptcy. As per reports, the level of bankruptcy filing has drastically increased by 44% in the last ten years, reaching to new figures every day. The consumer credit is skyrocketing to new numbers daily, exposing more and more people to face huge debts. This is when they apply for loan payoff schemes like debt settlement, debt consolidation etc.
Debt consolidation is indeed the best method to get rid of different small payments along with the big ones. However, professional debt consolidation firms consider the money abusing nature of consumers the main reason for accumulating outstanding loans. Here are some of the reasons that have been put forward by the debt consolidation experts:
Late Bill Payment
Owing to the sedentary lifestyle, most people tend to ignore the due bill payment. This act of negligence can further lead to huge debts after a while. Missing to pay off one occasional bill will not only do a major harm to your debts in the form of late fees, but it will also be detrimental to your credit score, as well as, your profile in the market. Financial gurus suggest paying attention to every mail you receive and setting an automated bill payment option to avoid future setbacks.
Negligence towards the Credit Score
Most people do not think about their credit score until they face a financial turmoil especially due to bad market condition. The biggest blow a person faces while having a poor credit score is his/her ineligibility to ask for a loan in order to mend the financial breakdown. Even if you manage to apply for a loan with a bad credit rating, the interest rates provided by banks will seem unaffordable. The best solution is to steadily develop a decent credit history and using as fewer credit cards as possible, particularly during an economic crisis.
The Absence of an Emergency Fund
Financial hurdles in a person’s life are sometimes unpredictable. It causes an unexpected need for money in order to cope up with the hard-hitting circumstances. In general, most people especially the younger demographic keeps on ignoring the requirement of an emergency fund. Having an emergency fund will not only save you from getting exposed to massive debts, but it will also help in settling small debts. According to the debt consolidation experts, the best way to secure an emergency fund is through fixing a time interval of at least 6 months and start saving money.
Overlooking Monthly Payment of Credit Card Bills
Credit card debts are considered pretty easy to accumulate due to sheer ignorance when it comes to the payment of monthly bills on credit card. This leads to the generation of credit balance that will put interest on your credit card debt. This keeps on going and at a certain point in time turns into a huge debt. Stop overspending on your credit card and try to waive off monthly bills. However, if you face a considerable debt on credit card, secure a debt consolidation loan and pay off the debt at a lower interest rate.
Hopefully, you are now aware of the main reasons that lead to enormous debts and persuade you to opt for a debt consolidation loan. Adhere to the good habits when it comes to expenditure and maintain a decent financial reputation in the market.