Debt: a word we hear daily and concept with which some of us are all too familiar. Whether student loans, credit cards, or something else, there are numerous ways we find ourselves owing money to another person or institution. Often times, you’ll hear financial experts and pundits advocating for “good debt,” or debt that works for you.
Certainly there are advantages to specific types of debt, but the majority of the time, we are fooled into thinking debt is not bad and we can leverage it to our advantage. However, there are many reasons why debt is the wrong choice and can lead you into financial hardship and even filing for bankruptcy.
Here at the Holland Law Office, our team has seen every type of debt and how detrimental it can be. If you find yourself in a difficult financial situation and are considering bankruptcy, give us a call and see how we can help you.
How Debt is a Detriment
As we mentioned before, it is easy to believe that putting yourself in debt can be beneficial in the long run. Not having to immediately pay your bills, getting an education, or even buying a house can all be instantly gratifying results of debt. However, there are countless other reasons why debt is a negative and can ultimately result in a bankruptcy.
Taking Away From Future Wages
If you think about debt in the long-term, you are ensuring the debt you take today with your future income. Your paycheck in three months could still be contributing to your new debt.
Sure, sometimes we need a credit card to ensure we have some credit history. However, putting more than you intend to spend on that card will be a culture shock when it comes time to pay your bill at the end of the month.
Rather, budgeting your money and having a financial forecast for the coming months will help you know exactly where your wages will go where they need and keep you from facing the daunting possibility of filing for bankruptcy.
Interest Rates Make it More Expensive
When it comes to big purchases like a house or a car, you may hear someone saying they want to pay in cash. This means they want to pay in-full and up front, thus avoiding interest rates.
Interest rates are, simply put, a charge for paying a total over time rather than up front. You are essentially penalized for promising payment rather than paying immediately.
When you think of it like this, interest rates are essentially making your purchase that much more expensive. A 2 year/24 month payment plan with 3% interest rates on a $24,000 purchase, assuming you take all 24 months to pay it off, will result in roughly $782 in interest payments. While this may seem minute in this scenario, increasing the principal or the interest rate for larger purchases can spell long-term disaster. If you find yourself facing such a dilemma or believe you need to file bankruptcy to remedy this situation, contact the Holland Law Firm and see how we can help.
Marriages and Future Plans can Take a Hit
While we hate seeing it, divorce can be a result of too much financial debt. The burden of money places unneeded stress on relationships, as well as the idea of any future plans like buying a house can be derailed by debt and subsequent bankruptcy.
Not only is it important to discuss debts with your partner, but it is even more critical to ensure it won’t cause strain on your lives together. If you are planning on starting a family or buying a house, your existing debt can prohibit you from moving forward in those endeavors. It’s much better to save yourself and your loved ones the headache if you can avoid it.
Debt can have certain advantages, depending on its use. However, incurring debt just to attempt to leverage it or avoiding making payments upfront can be a roadblock for your future endeavors and simply living life.
If you find yourself in a debt situation that has lead to the need to file for bankruptcy, the Holland Law Office can help. Fill out our contact form or give us a call and let us guide you through these uncertain times.