When we talk about debt myths, we are essentially referring to flawed thinking and assumptions regarding debt commonly perpetrated by individuals not only in the UK but also other parts of the globe. We are primarily referring to fallacious arguments put forth as to why a person should be in debt or rather how they handle the whole issue of debt. Unfortunately, debt myths are deeply entrenched in the social fabric and most of us unknowingly advance perceptions that are in essence inherently wrong or incorrect. Well, let’s debunk common debt myths.
Debtors should be contented with making minimum payments
Well, the proponents of this myth somehow believe that by so doing, a person avoids getting into further debt or letting the same debt spiral out of control. However, let’s be realistic for a moment here. Let’s assume that you have a debt of 4000 pounds with an interest rate of 19.99%. If you were to ascribe to the aforementioned thinking of making minimum payments, it will take you an unbelievable 9 and a half years to clear your debt not to mention that the initial debt would have spiralled to 4664 pounds. In light of this, one should strive to clear off their debts as soon as possible and do away with the myth of simply making minimum payments.
The false sense of good debt
Apparently, there are people who fallaciously believe that they have good debt and therefore there is no cause for worry. Well, this is a false sense of optimism as there is no such thing as good debt. In fact, what we have is either bad debt or really, really bad debt. So long as you are obligated to clear off your debt and defaults could put you in a precarious position, it would, in all honesty, be foolhardy to believe that there is such a thing as good debt. For instance, a lot of people like to think or rather believe that a mortgage is a good debt. But ever wondered what would happen if one were unable to pay for that debt? Well, they would have to clear the same debt by selling their house. How then is that good debt?
The only way to afford some things in life is through debt
Well, there are people who believe that the only way to afford say a car, a vacation, an education or even a house is through debt. Again, this thinking is flawed. With the exception of say maybe a house, you can indeed afford a vacation, a car or even an education without getting into debt provided that you plan for the same in advance and check how you essentially use your money. Are you intending to go to the Caribbean for a vacation? How about you save for the same for one year. I mean, really, it’s all about planning and handling your finances in the right way.
Clearing off debt will make you miserable
Really? How is that even remotely possible? If you feel that missing out on a Saturday night drinking spree will make you miserable, then you really need to re-evaluate yourself and put your priorities right. The only way to get out of debt is making some serious sacrifices and unfortunately, that means you have to forego some of the things you believe make your life meaningful. In any case, you will be happier when you are debt free as opposed as to when you are deep in debt.
The quickest way to get out of debt is through bankruptcy
Granted, the idea of having your debts written off through bankruptcy might seem irresistible or rather a wise thing to do. However, think of the backlash and the permanency of bankruptcy not to mention the inability to get meaningful credit in the future and you will understand why resorting to filing bankruptcy is not always the best thing to do. You really need to weigh your options carefully when it comes to debt.
You have sufficient time to clear off your debt
Well, don’t be misled. The best time to clear off your debt is today. It doesn’t matter if you are single, in your first job and in your early 20s. Endeavour to clear your debt today because the more time you waste, the worst your debt situation becomes.