Guest Post: 7 Reasons To Keep Track Of What You Owe
Everyone knows that borrowing money is not a good idea but sometimes it is a necessary evil to get you through a major mishap, such as the boiler going bust or the car breaking down. However, a recent study revealed that many people have no idea how much they owe, preferring instead to bury their heads in the sand, proverbially, not literally. Although it might be more comfortable to kid yourself about how much debt you have, here are seven reasons why it isn’t a good idea….
1. Not knowing how much you owe will stop you getting back on track. You can’t budget effectively. Even if you only opt to pay the minimum on your credit card each month (which is never a good idea unless you are absolutely skint) you still need to know how much will be debited from your account. Having no clue about the repayments mean you are not budgeting and are simply crossing your fingers and hoping you have enough cash.
2. You will damage your credit rating. You might not have sufficient funds in your account to cover the repayment. This means not only a black mark on your credit file for a late payment but if you are on a special deal, you may have to kiss it bye-bye. Failing to pay on time allows the credit card company to revoke the terms and apply not just charges, but a higher level of interest.
3. Being unprepared for an unexpected bill could mean you fall behind in other financial areas. Even if you do have the money in your account, it could have been earmarked for another expense, such as your mortgage or rent. Getting caught unawares of another bill could leave you with not enough money to pay for your essentials.
4. Misleading information could spell bad trouble. If you need to declare your financial circumstances, perhaps on a mortgage application or maybe you are opening a new current account; you could be accused of fraud if you provide misleading information about what you owe. Claiming ignorance is not considered an acceptance defence. You could find yourself not only rejected but blacklisted making it almost impossible to get accepted by any mainstream provider.
5. You could end up in a spiral of debt that you find hard to get out of. It could drive you into taking extreme measures such as relying on high-interest payday loans, or even worse, going to a loan shark, for money to get you through the month. For most, this is a downward spiral from which it is difficult to escape.
6. You could find it hard to get additional credit in the future. If you are relying on credit every month, you may well end up going over your limit. In many cases your lender may not reject the transaction but will slap you with charges and any future creditor will view you with extreme caution. You may also find your credit limit suddenly slashed; most lenders reserve the right to do this if they feel you are not managing your account properly.
7. Ignoring debts will only make your situation harder. You might not want to know how much you owe, but if you don’t take a deep breath and face the facts, how will you tell when your debts have become unmanageable? If your financial circumstances are less than comfortable, totting up how much you owe to all your creditors can make you feel anxious. However, there are a lot of ways to get help but unless you take the first step and acknowledge that you can no longer manage your debts, you will be forced to struggle on alone.