Cash Money Life had a great article on 5 Debt Traps. I HATE debt, who doesn’t? I can’t wait until my house is paid for, my car is done and my student loans have completely vanished.
Here are debt traps that you should avoid:
- Payday loans. I hope this trap is obvious. When I was younger, I distinctly remember my dad laughing at the TV whenever payday loan commercials would come on. The fees are exceedingly high, and you just fall into a crazy debt trap circle that you might not be able to get out of.
- Having maxed out cards and only paying the minimum. You are ruining your credit and also falling into a hard to get out of trap. I pay all of my credit card balance completely off every month. I have ever carried a balance.
- Buying too much house. You will most likely get approved for a mortgage that is too big. We were approved for a mortgage of around 33% more than what we could actually afford. You should definitely go under what you are approved are.
- Having too much in student loans. Read my past posts on why I don’t regret my student loans, and also my other post on how student loans might be bad for you. Carefully consider your degree, the loan amount and the school you are going to and make sure it’s worth it.
- Co-signing on a loan. Make sure you trust this person, or it will end badly.
What other debt traps do you think I left out?
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Spending more than you have. This was a huge one for me. I thought that credit cards = money when I first got one when I was 18. Luckily I figured it out but it took a lot of paying of unnecessary debt that I could have just saved.
Agree with no. 3 and 4. the credit card one, i learned when i was like 18. lol
Reading sale fliers and believing that by shopping you are saving money. Using coupons on something you would never buy to save money. Shopping for things you don't need because it is a good sale. Any time you spend money you are not saving money!
I agree with Kim(OMW). If you don't need it then its not a deal at all. Also PLUS loans I think alot of parents feel they have to do them, we have told all three of ours that we will not take them out. We did one for my oldest the first year he was in college(before we knew better) but he is paying it back.Judy
Never did any of THOSE thank goodness. Though it did take me 10 years to pay off my $16,000 in student loans at $250 per month!
I agree with everything you said; especially pay day loans.
I wholeheartedly agree with all of these. Haha, for #3, when I called about a prequalificaton I told the folks at the bank how much we had for the downpayment and how much house we were *willing* to buy. I didn't even want to know the max that I'd qualify for unless it was lower than the top of our budgeted range. I STILL don't know how much I'd have qualified for. Nor do I care. 😉
I agree with all of them, and especially OMW's comment.