Why Falling Into Debt Is Easy but Getting Out Can Be So Hard

Before signing your name on the dotted line of a credit card application, mortgage document or car loan agreement, wouldn’t it be great to have a warning message appear before your eyes that read “Wait! Your Credit Could Get Be Destroyed and You Could Fall Into Debt If You Sign Your Name!”?

Unfortunately, we don’t have this type of warning message to help us avoid the bad-credit cycle that is easy to get into but difficult to climb back out of. This means we have to learn how to sidestep the pitfalls of debt on our own. But how can we do this when relying on credit and loans is our way of life?

Falling Into Debt Is (Unfortunately) a Snap

The society we live in is largely driven by how much credit we can obtain. We are so strongly encouraged to take out auto loans, mortgage loans and credit cards that if we don’t, we are often deemed undeserving of the opportunity to obtain financial assistance from lenders and creditors in the future.

The push to obtain credit and loans sometimes inadvertently results people taking on debt they can’t repay later. This is especially true for those who:

• Underestimate repayment capabilities: It’s common for people to take on loan or apply for a credit card without realizing the significance of the interest rates in tow. Before long, APR increases kick in and they end up owing more than originally anticipated.
• Don’t manage money well: Some people are very good at filling out applications and bad at thinking about how they will pay their loans back or cover the purchases on their credit cards down the road.
• Suffer unexpected circumstances: Some people are financially responsible but experience an extenuating circumstance that cripples their ability to pay.
• Live with a spouse’s or dependent’s mistakes: You could find yourself in debt if your spouse falls behind in payments or you’ve co-signed a car for a dependent who defaults.

What’s bad about the credit and lending system is that it only takes one mistake or unfortunate circumstance to fall into debt. Even worse? Trying to get out if it is like pulling teeth (all of them).

Why It’s So Difficult to Get Out of Debt

We’ve already established that just about any circumstance that results in a lack of payment could push you into a bad-debt cycle. Now, here are some reasons that it’s difficult to get out of debt once you’re in:

• Interest and penalties: A major reason why getting out of debt can be difficult is the additional money that gets tacked on after you fall behind on a payment. If you miss your credit card, loan or even cell phone payments, you could suffer penalty fees and interest that make repayment even more difficult.
• Temptation: The temptation to add more to existing debt, especially credit cards, is a real problem for some. If you already have a habit of buying items without making payments on a credit card, you could see your debt rise significantly until it’s too challenging to pay back.
• Giving up: Many people decide once their bad debt has marred their credit report that there’s no point in paying anything back. They believe that even if they pay it off, the blemish won’t be removed from the report and their credit scores won’t improve much. So instead of working to get out of debt, they simply give up.

There’s no doubt that getting out of a bad-debt cycle is challenging, but it’s not impossible. In fact, there are options available that could help pull you out sooner than later.

Making Your Bad-Debt Exit Strategy

So what are some ways you can begin to pull yourself out of debt? Here are a few options to consider:

• Talk to your lender/creditor: Have a talk with your lender or creditor to let them know you’re not trying to avoid them and that you would like to clean up your issue in the quickest and most effective way possible.
• Set up a payment plan: If you cannot pay the amount you owe in full, it’s sometimes often to set up a payment plan instead of settling your account (paying only a portion of what’s due) since the latter looks worse on your credit report.
• Look into debt relief options: You could also consider debt relief options like debt settlement or debt consolidation that allow professionals to assist you in cleaning up your debt and credit reports, usually at a cost.

Know that you don’t have to be the victim of bad debt if you don’t want. But what’s better than cleaning up your debt? Avoiding it altogether.

Avoiding the Debt Cycle

The best way to stay out of debt is to avoid it completely, so here are some ways to keep yourself out this cycle:

• Pay your bills on time: First and foremost, you have to pay all of your bills on time. If you don’t think you can trust yourself to do it on your own, take time to set up an automatic payment schedule that can pull money out of your bank account for you.
• Be aware of your credit utilization ratio: In the world of personal debt, there is such a thing has having good debt. Your car, mortgage and credit cards can benefit you greatly if you manage them well and develop a good credit utilization ratio.
• Don’t bite off more than you can chew: Be careful not to take on more credit and loans than you can reasonably pay back. Having money extended to you is a privilege, not a right. So create a spending plan with your own money before asking a financial institution for theirs.

Sometimes it seems totally unfair that it’s so difficult to get out of the bad-debt cycle once you’re in. But now that you know a little bit more about the process, hopefully you will be able to get yourself out of it, or better yet, avoid it completely.