It is normal to carry some amount of debt that can be easily managed each month. However, there are times when debt can slowly start to grow out of control. This is when quick and decisive action is required.
There are several reasons why it is important to deal with debt as soon as a problem is noticed:
Avoid fees and penalties
Dealing with debt right away can help to avoid fees and penalties for late, missed or incomplete payments. These fees can be very harsh and add up quickly with each bill. Some can accrue to become larger than the principal amount over time. Taking care of debts right away can prevent or minimize these fees.
Protect personal credit
Problems with debt can have a devastating impact on personal credit. A few late payments can start to bring scores down. Defaulting or letting debts go to collections can destroy good credit. Taking immediate steps to handle debt that is getting out of control can protect personal credit.
Keep interest rates low
Ignoring problems with credit card debt could allow the company to start raising interest rates punitively. It is even possible that rates could rise to the maximum amount allowable by law. This can quickly increase the amount owed every month. Getting assistance with debt problems right away will help to keep interest rates low.
Preserve relationships with creditors
Ignoring or letting debts accumulate can damage relationships with utility companies, credit card companies and banks. The damage done could cause the creditor to become much less forgiving and sympathetic. It could even make new services inaccessible. Preserving the relationship means taking care of debts before they become a major problem.
Ignoring debts can lead to legal action
Ignoring problems with debt completely could lead to legal action. Unsecured debts that are unpaid might result in wage garnishment. Secured debts that go unpaid could result in repossession. Taking care of debts fast when a problem starts will help to avoid legal action that could do long-term financial damage.
Professionals can help to deal with debts
One of the main ways to deal with debt problems is to talk to a financial professional. Financial professionals have many tools available from counseling to consolidation and negotiation that can address the problem. Talking to a professional right away can help to keep debt under control and restore financial stability after a problem is noticed.
No problems with debt should ever be ignored no matter how small they seem. Even action that does not ultimately resolve the problem is better than doing nothing at all. Visiting a financial professional and letting creditors know what is happening will always help.
Informational credit to David Reynolds & Associates Inc.
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