2020 was a rough year for many checking accounts across the United States. Between record unemployment numbers and the partial closure of the economy, you’re not alone if you feel as though you’re starting 2021 on unsteady footing, financially speaking. You might even be so strapped for cash that you’re considering taking on more debt. Not so fast! These types of debt are more disadvantageous as they are beneficial, and should be avoided whenever possible.
Credit Card Debt
Most of us are all too familiar with credit card debt. According to Value Penguin, the average amount of credit card debt for families who carry a balance is over $9,000. These balances can be very hard to pay off, thanks to insanely high-interest rates, which in turn makes it hard for credit cardholders to build wealth over time. Play it safe and avoid taking on any more credit card debt than you need.
If you live paycheck to paycheck, you might have been tempted by payday loans. Yet, there’s a big downside to these loans, which come with hefty interest rates ranging from 10 to 30 percent on every $100 they loan you. These loan companies also have access to your checking account, which guarantees that they will collect the money, whether or not you can afford the payments.
Renting to own can entail either consumer goods or property. But, no matter what it is you’re trying to claim ownership of, you should know that these plans can be bad news for your finances. Often, these agreements leave you paying monthly installments that amount to more than the cost of the item. You’ll also be on the hook for hefty fees assessed on late payments, and fees that might not be clear at first.
Some people take out personal loans in order to pay off mounting credit card debt and consolidate their payments into one lower monthly payment. This can sometimes work to your advantage. But, if you’re considering a loan because you want to buy a new TV or pay for a wedding venue, think again. These loans carry high-interest rates and, if you can’t make timely payments, you may face a lawsuit.
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