A great number of people are now resorting to borrowing money to pay debts in a desperate attempt to get out of debt and become financially independent. The problem is that most people borrow money just to cover up their unsecured liabilities. In fact, many people do not even know that they have such massive liabilities and therefore end up spending most of their income on payments made to other creditors. If only you had knowledge of this disease at an early stage, then perhaps you would have taken remedial action as early as possible.
What exactly is debt? According to the dictionary, it is “a financial obligation of a borrower to repay an outstanding loan, the repayment of which is deferred”. Borrowing money from multiple lenders to repay debts may be termed as debt when one of the borrowers takes up another loan to repay previous debts. In simple words, the term debt can be used to describe any obligation resulting from borrowing money, whether secured or unsecured. The most common form of borrowing money to pay debts is credit card debt.
Many people today have debt problems and if you are in a similar situation then you should know how to deal with them in the best possible manner. You need to make payments to your creditors on time but this does not mean that you have to repay them by a specific date. If you are not in a position to make payments to your creditors on time then your liabilities could grow and eventually hit you hard. The result could be legal actions, surcharges on your current account, and increased interest rates on loans taken for repayment.
You can solve the above problems by borrowing money from multiple sources to make payments to your creditors on time. However, each solution has its own disadvantages and benefits. You may end up defaulting on payments to your credit cards and get sued for the default. This may cause an inconvenience. Further, if you are a responsible person then you would avoid making payments late. However, borrowing money from multiple creditors and paying them separately is not feasible as it involves a lot of paper work.
If you do not want to make payments to multiple creditors then you should opt for a personal bankruptcy. A personal bankruptcy is when you declare that you are unable to repay your debts through any form of financial agreement. The court decides the distribution of the money. In case of personal bankruptcy, the creditors are liable to claim from you the full amount of money that was lent to you. Once you have declared yourself bankrupt, the creditors cannot contact you for quite some time.
The best way to tackle your debt problem is to borrow money from multiple creditors to make payments to all of them. However, this can be a problem as the interest rate charged by the lenders will be very high. You can avoid this pitfall by opting for a debt consolidation loan.