No one ever plans to fall into debt, but it happens more often than people realize. In many cases, you make financial decisions that you hope will help you pay off your existing debt, but only causes you to fall deeper in debt. For instance, you might think taking out a loan to pay off your credit card debt is a good idea. Even if you qualify for the loan, you’ll end up with loan payments and a credit card that you can now use freely. Before long, you’ll have that loan payment and more credit card debt.
The problem is that you may never chip away at what you owe, because your payments will primarily go toward the interest on your debt. If you’re not paying more than your creditors require, that interest can grow on its own. (more…)