Top 10 Debt Pitfalls

Read this tip to learn more about debt pitfalls.

ByABC News via logo
March 2, 2011, 11:21 AM

Feb. 18, 2011 — -- It's easy to fall into debt if you don't knwo how to avoid it. Check out the tips below whic explains the top ten ways to go into debt.

1. Co-sign on a loan with someone else.

Co-signing on a loan for a friend makes a three-way transaction -- you, your friend and the creditor -- that often ends in disaster. Never co-sign a loan unless you are willing and can afford to pay the loan yourself. As a co-signer, you are equally responsible for the loan and should the other party default, you will be pursued like a long-lost lover to make good on the debt. Many times you do not know that the original borrower is late on the payments until you find that your own credit is knocked up. Once the less-than-blessed event of a delinquency appears on your credit, the negative mark cannot be removed for seven years. If you co-sign, expect to pay.

2. Abuse your credit to live beyond your means

If you must buy groceries, gasoline or other essentials using credit because you have no money in your checking account, you need to take immediate action. To avoid debt, spend less than you earn. Unless you do, you will create an ever-increasing debt load that will one day come crashing down on you.

3. Overspend devilishly on luxuries and wants

Shopping as entertainment is dangerous. If you spend on credit and charge items that you cannot afford, such as a house full of furniture when you feel the temptation to redecorate, or a suite at the Bellagio in Las Vegas when you hear the dice calling, you are on a quick trip to overheated and unaffordable debt.