Learn the Most Important Debt Advice

There is no dearth of debt advice for most people, from family and usually elders to well-meaning friends. Now there is a treasure-trove of information available online. Banks and lenders also offer debt advice to borrowers, which may seem ironic but it does happen. Financial experts have written scores of books and hundreds of papers on debt management. You have to be financially pragmatic to avert debt. You must be meticulous with your financial management to avoid continuing in debt after you have incurred one or a few. Amidst all the recommendations and advisories you will come across, here is one debt advice you must always bear in mind.

Never borrow money to repay borrowed money. In other words, do not seek loans to repay loans. This applies to payday loans and short term loans. People do not opt for a second student loan to repay the first one. Companies often seek loans to repay existing ones, a major reason why banks have nonperforming assets and some of them turn into bad debt. You will not qualify for a personal loan from a bank if you have one pending. The same applies to home loans, unless you have enough income to account for another mortgage. In regards to payday loans and short term loans, Pay Pony suggests avoiding multiple borrowings, from the same lender or different lenders.

Payday loans are easily available. They are also relatively smaller funds so people may think multiple loans will not be a problem. A fundamental issue with such thinking is that multiple loans have multiple interests. It is not just the borrowed money that must be repaid but also the interest. The same reality is at the crux of why you should never borrow money to repay borrowed money. You will not only be repaying the principal amount of the second or subsequent loan but also the additional interest. In order to manage a debt of a certain amount, you are seeking another loan and effectively increasing your liability.

This debt advice should never be forgotten. It is crucial because many people fail to prevent a cycle of debt. They take one payday loan, fail to repay so opt for another and then begins multiple debts piling up till a stage is reached when the borrower does not get approved for any more loans. Remember this debt advice, even if the going gets tough. You must find a way to repay existing debt before piling on more.