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How Not to Get Caught in the Debt Trap

BY: Sathish k Paul | Category: Finance | Submitted: 2010-10-12 05:50:37
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Article Summary: "If you get into a debt trap, you are doomed. Read on to learn how not to get into the debt trap..."

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These days, there are millions of financial companies that have sprung all over the world. Has anyone thought why so many have started springing up every now and then? The main reason for all these companies to start is because there is a lot of potential for them to earn a lot of money. Where do these companies earn all their money from? They earn it all from the common man. People like you and me, who are trying hard to get out of the debt that we are already in. These companies are trying to get us back into the mire deeper than ever so that they can earn all the money that we earn through hard work.

Of course, the financial companies are also useful for us when we really need money to tide over a difficult period. The problem is that they temp us with such lucrative offers that it is almost irresistible for a person to say no to these offers. There are also many companies that do not tell you completely about the deals that they make with you. They wantonly seem to miss some of the clauses that will be beneficial to them, but detrimental to you. To avoid all these, you can do certain important things that will help you to avoid getting into the debt trap.

1. Repay all the debts as soon as possible:

The first and the foremost aspect of avoiding getting into the rut is to repay all the existing debts as early as possible. This is a very important factor because if you are to repay a lot of money as debt, then you can have the income through your earnings to spend on things that you want more. You can make a repayment plan so that all the debts are repaid as soon as possible. This is sure to help you in the long run.

2. Do not get new loans:

The next most important factor is to avoid getting any more new loans. You will be pestered by many companies that know you are already in debt. These companies will ask you to get a new loan. This should be avoided at all costs unless you are consolidating your debt. If you are just planning to get a new debt to spend more, then this should be stopped immediately.

3. Avoid buying assets:

You should also make a decision that you will not buy any more assets if you are to get out of the debt trap. There is no point in making an investment when you have a debt to pay. The debt should be finished off before you buy anything, even though it may seem essential. This is what good business sense is. If you have a lot of amount to pay off, then buying new assets will delay the payment and this can cause you to get more in debt.

4. Read the fine print:

You should also read the fine print before you actually buy any loan. If you are already in debt, this may not help you, but if you are in the planning stage to get another loan, then you should read all the terms and conditions so that you are sure that the company offering the loan to you is not shortchanging you.

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