How to avoid Debt Traps?

There are lots of products and services on the market that may promise temporary relief from your debt and some of them can. But most of them are just debt traps that can make your financial worse. Here are the 10 Debt Traps and tips on how to avoid them.

Credit Cards

Credit cards are a double-edged sword. In other words, they can be very helpful when you need cash, but if you don’t manage your accounts wisely, credit cards can make your financial situation worse.

Here’s how: Fees can be exorbitant:

• Late payment fees-If your payment is even one day late, you may be subject to a late fee.
• Over-the-limit fees-If you go over your credit limit, you may be subject to a fee.
• Cash advance fees-Most companies charge from 2%-4% of the amount advanced, with no maximum amount.
• Balance transfer fees-Some creditors charge as much as 4 - 5% when you transfer the balance from another card. So if your intention is to lower your interest rate, you may not achieve your goal when you consider the fee involved.
• Minimum Dues: Just Paying Minimum Dues can increase your outstanding.

Home Refinance

When rates are low, it’s tempting to refinance your home, because your monthly payments will go down, and you’ll get some extra cash.

Only people with the best credit qualify for the lowest rates.

Finally, stop thinking of your house as an ATM machine. The purpose of a 30-year mortgage is to have it paid off when you retire, to reduce your expenses when your income decreases. Borrowing from your home will keep you house poor.

Payday Loans

These loans are basically very expensive credit. Payday Loans are likely the worst debt trap of them all. Most of them roll into a second loan, and then a third. It’s better to pay late or default on other, lower-interest debt than to take out a payday loan.

Home Equity Loans

• Loan Against your Home Residence is risky, but Loan Against other Properties is fine as Interest is lower than Unsecured Loans
• They are secured loans that use your home as collateral. They may provide some measure of immediate financial relief, BUT if you miss any payments, you could actually lose your home. In fact, some unscrupulous lenders are counting on you missing your payments so they can collect on your most valuable asset.
• If your financial situation is due to overspending, a home equity loan can make it even worse because it gives you access to more money.

You can apply for an attractive offer with best possible Rate of Interest and Terms for Personal, Business and Home Loan.

FundsTiger is an Online Lending Marketplace where you can avail fast and easy Home, Business and Personal Loans via 30+ Banks and NBFCs at best possible rates. We will also help you to improve your Credit Score. We have dedicated Relationship Managers who assist you at every step of the process. We can also help you in Balance Transfers that will help you reduce your Interest Outgo.