Financial dramas are stressful. Indeed, they can make even the most level-headed person feel backed into a corner. This can then lead to rash decisions being made; decisions that can make the future of your finances much worse.
Although it can be emotionally taxing to be in constant financial distress, it’s important to take a breath and think through your next move. To help you avoid decisions that could cause you much bigger problems with money down the line, here are five panic moves to avoid in a financial emergency:
1. Signing Up For High-Interest Loans
Whilst payday loan alternatives are the sensible choice, in a panic, you might be tempted by deceptive loan sharks and easy-to-obtain high-interest options. These kinds of deals prey on your panic, offering you financial deals that are easy to get into and terrifyingly hard to get out of. Basically, they are a very bad idea.
Instead of going down this dangerous path, research non-profit lenders who offer no-interest and low-interest loans to those in need of a financial leg-up.
2. Opening Up New Credit Cards
It can be tempting to get a new credit card to pay off an urgent loan. The problem is that although you pay off one debt, you immediately start another one, possibly with worse repayment terms and higher interest. Credit cards can be useful if you are using a zero balance transfer option and you can pay all the money back within the stipulated term. However, if you fail to clear the balance in time, the interest is usually quite steep with these cards.
3. Ignoring The Debt
Studies have shown that those who struggle to pay off debt are over 50% more likely to also struggle from depression and anxiety. You are not alone in reacting to debt in this way. However, the hard truth is that breaking down won’t make your problems go away. Your minimum payments will continue to add up. As challenging as it will be, you must face your debt and work on a plan to build your way out. No positive changes can come from ignoring your problems.
4. Using A Random Debt-Relief Company
Debt relief companies will market heavily that they have the ability to help you deal with your financial problems in a way that you are unable to do yourself. Sadly, they aren’t always honest in their claims. Even worse, some of these organizations are straight-up scams.
Unscrupulous companies will likely charge exorbitant fees or cause more problems than they are worth in the first place. The exceptions are legitimate charities and organizations that help you for free.
5. Filing For Bankruptcy
Although filing for bankruptcy can be the right financial choice for some people in debt, it is not something to step into lightly. The process is complex and stressful, and the implications will affect your life for some time. Do check out your options if you are drowning in debt, but do not make any rash decisions until you have explored all possible avenues.
Being in debt is stressful and can take a toll on your mental health, personal relationships, and on your overall quality of life. Panicking is quite normal, as are a whole heap of complex and difficult emotions. What matters is that you take a breath and don’t make any decisions while in a panic-mode. Seek advice, get support, and take it slow. With honesty, information, and a logical strategy, you will start moving towards a debt-free life.