We’ve heard a lot about “toxic debt” in reference to banks and subprime loans, but what about personal toxic debt?
Toxic debt for individuals, not to be confused with Zombie debt, is debt where:
- The lender can change rates and terms at any time.
- The standard or default interest rate is in the double digits
- Initial “teaser” terms and rates encourage you to borrow more than you can comfortably pay back.
Given the above definition, it’s no surprise that most toxic debt for individuals is credit card debt, but it could also be in the form of payday loans or even personal loans. This debt is toxic because the terms of the debt prolong the time you remain in debt. It acts like a wound that bleeds slowly at first, then becomes more acute over time until you realize it’s too late to heal it!
Getting rid of this toxic debt and cleansing your financial life is not as easy as getting into debt in the first place, but it can be done.
- Cut any unnecessary expenses. You can live without cable T.V. for a few months, or even a year if that’s what it takes.
- Take all the money you save by cutting out the unnecessary, and put it toward paying down your debt.
- If that’s not enough, consider debt counseling but be aware that it will most likely prolong your servitude to debt, and you’ll end up paying for it in some way.
I know it’s hard, but it is possible. You can read how I did it in 7 steps to getting out of debt.
I’ll have to mull this post over. You might be on to something here.
[...] year started out with discussions about toxic debt and ended with the mortgage debt relief program going until [...]