Living with debt is an epidemic in the United States, as Americans average nearly $93,000 in consumer debt from credit card accounts, student loans, and mortgages. Poor financial literacy and a chronic mishandling of finances contribute greatly to debt and dig a debt hole even deeper.

There are many mistakes those struggling with debt payoff can make, including not paying off high-interest rate credit cards first, failing to adjust spending habits, and forgetting to pay bills. By avoiding these mistakes, Americans can start on their debt-free journey and stick with a debt reduction plan that works. At Delaware Title Loans, Inc., we also offer title loans with a max value of $15,000 for those suffering from financial emergencies who qualify for the quick cash infusion.

Eight Mistakes To Avoid With Debt Repayment

Experian released a study in February 2024 with startling numbers about Americans' escalating debt. Total consumer debt in the United States in 2023 was $17.1 trillion, a 4.4% increase from 2022. They also found that Americans average $4,322 in credit card debt, $38,877 in student loan debt, $19,011 in auto loan debt, and $12,306 in personal loan debt.

This large amount of debt facing most Americans can be challenging to deal with, especially since the average American's annual salary is only about $59,000. Those who have had to rely on credit cards to get through financial emergencies may not have a sound debt payoff plan and can make errors that lead to escalating debt amounts.

The following are some mistakes people can make with their debt repayment plan:

Failing To Repay High-Interest Credit Cards In Their Debt Reduction Plan

Credit card debt is arguably the most common form of debt, and it can be challenging to map out a debt-reduction plan to address what is owed. Many financial advisers say that making a minimum payment on credit cards and then repaying what you can on the highest interest-rate card is the most cost-effective approach to credit card debt repayment.

Studies have found that people too often focus on cards with high balances instead of those with high interest rates, an easily fixable mishandling of debt repayment. A study from the Boston School of Business also found that those who paid off their accounts one by one rather than all at once eliminated their debt 15% faster.

Not Knowing How Much Debt They Have To Repay

Before making a debt repayment plan, a good pay-off tip is knowing how much debt you need to repay. According to GCF Global, most people owe about 20% of their annual salary. However, those with more debt must understand their debt's value to establish a debt-reduction plan.

Take some time to outline all your bills and associated debt amounts to highlight what you want to target within your debt repayment plan first. You can organize your strategy for paying off debt based on the value of certain debt amounts and how much interest each account collects.

Having A Debt Repayment Plan That’s Not Manageable

Debt repayment can take years for large debts — and that’s OK. Going for a plan that pays off debt as quickly as possible is admirable, but that may not be a realistic approach. Instead, develop a plan reflecting your income, total debt, and monthly expenses.

Trying to pay off more debt than you can reasonably afford will worsen your financial situation. Take your time and pay off as much monthly debt as possible. You should also consider your separate financial goals, as you may need to devote resources to a savings account or emergency fund.

Failing To Adjust Spending Habits To Account For Debt Reduction Plan

While you target paying down debt, you should spend money on what you need rather than want. Most of your spending should go toward vital expenses, such as rent, utilities, and food, and less should go toward the little extras like takeout or vacations. While these small financial changes may seem insignificant, saving an extra hundred dollars per paycheck can go a long way in helping with debt repayment.

You should also avoid making big purchases as you begin a debt repayment plan unless necessary. It’s not the time to take on additional debt in the form of a new car, redesigned kitchen, or extravagant vacation.

Forgetting To Pay Bills Or Loans Can Affect Your Debt Reduction Plan

Those struggling with debt repayment may fail to grasp how many monthly bills they must pay. Many people have to worry about a significant amount of bills, including utilities, rent, mortgages, and student loans. A large number of bills is quite common these days, and it’s difficult for many to keep up.

If you have bills that do not provide an automatic payment option, consider an app or a web platform that keeps track of your bills and lets you know when they are approaching. They can also send you a reminder on the day they are due to ensure you don’t have late bills.

Neglecting Saving For An Emergency Fund Can Hurt Your Debt Repayment Plan

One common mistake made by those looking to repay debt is assuming the debt they have currently is all they’ll ever have. People can develop tunnel vision in only paying off their debt, but financial emergencies can surface that can severely affect their debt reduction plan.

Those looking for tips for paying off debt should consider investing in an emergency fund. Setting aside some money every month for an emergency fund can help them avoid future financial disasters. This fund can help cover unexpected expenses, such as home and car repairs, medical bills, and unexpected travel costs, to avoid creating even more debt.

Failing To Explore All Options For Debt Payoff

People have many options for helping with their debt reduction plan that they do not take advantage of. For example, there’s nothing wrong with seeking assistance with debt repayment. Many charities, grants, and government programs geared toward low-income individuals or families may help if you qualify.

Other options include using a reputable credit counseling agency like the Consumer Credit Counseling Service, a national program that operates through local organizations. These non-profit organizations can offer educational resources about managing debt, free or low-cost counseling, and debt repayment services to help on your debt-free journey.

It is also worth your time to check whether you qualify for debt consolidation, which may lessen your overall debt load and create a more manageable monthly repayment plan. This involves taking out a larger loan to pay off multiple credit cards or debts, possibly allowing for more manageable repayment terms with lower interest rates or monthly payments.

Title Loans Can Help Those In Debt Facing Financial Emergencies

Credit counseling agencies can work with you to create a more effective debt repayment plan, but they cannot foresee a financial emergency. It can feel deflating to do so well with your debt repayment only to have a huge roadblock in the form of a financial emergency, such as necessary last-minute travel, vital car and home repairs, or an emergency room hospital bill.

A title loan may help when emergencies strike so you can stick to your debt reduction plan as closely as possible. A title loan uses your vehicle’s title as collateral in exchange for a loan amount you qualify for. It is typically paid off over time and you can keep your car and drive as usual during the loan period. A title loan is quick and easy to qualify for at Delaware Title Loans, Inc.

Delaware Title Loans, Inc. Can Help With A Title Loan Today

A loan of up to $15,000 is available in as little as 30 minutes for those who qualify at Delaware Title Loans, Inc. We’ve worked to streamline the title loan process with our easy-to-fill-out online loan form. You can also chat with one of our representatives over the phone and bring the required items to a location near you. You can get the cash you need as early as the same day or the next business day.

You can avoid chronic debt repayment mishandling and begin your debt-free journey by considering all your options. If a financial emergency comes up that affects your debt repayment plan, you can start the process of getting a title loan today. Start online, give us a quick call, or take advantage of face-to-face help at a Delaware Title Loans, Inc. location near you.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.