Tuesday 23rd July 2024

Debunking common myths about debt 

Tolu dispels common myths about debt.

Debt. It’s a topic that can make even the most financially savvy individuals feel a twinge of unease. Whether it’s the weight of student loans, the pressure of credit card bills, or the imminent presence of mortgages, debt is a reality many people grapple with. 

But amid the jumble of financial advice and well-meaning tips, there are myths about debt that persist, quietly shaping our perceptions and influencing our decisions. Have you ever found yourself believing that all debt spells disaster? Or perhaps you’ve been told that negotiating with creditors is a lost cause? 

In this post, we will tackle seven common myths about debt head-on. We’ll separate fact from fiction, debunking misconceptions that might hold you back from achieving your financial goals.

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So, if you’re ready to confront the truth about debt and take control of your financial future, join us as we debunk some common debt myths.  

Myth 1 – All debt is bad. 

While high-interest debt can be detrimental to your financial health, not all debt is created equal. In fact, some types of debt, such as mortgages or student loans, can be considered “good” debt because they can potentially increase your net worth or earning potential in the long run. 

Myth 2 – Debt is a sign of financial irresponsibility. 

While excessive debt can raise concerns about financial stability, it’s essential to recognise that not all debt stems from irresponsible spending. In some cases, individuals may find themselves in debt due to circumstances beyond their control, such as serving as a guarantor for a loved one or facing unexpected medical expenses.  

Additionally, responsible debt management involves leveraging borrowed funds strategically to achieve financial objectives, such as investing in assets with potential for growth or building credit history. By understanding the nuances of debt and making informed borrowing decisions, individuals can navigate their financial obligations while working towards their long-term goals. 

Myth 3 – Debt consolidation always saves you money. 

While debt consolidation can be beneficial for simplifying repayment and potentially reducing interest rates, it’s not always the best option. It’s essential to compare the total cost of your existing debts to the cost of the consolidation loan, including any fees or changes in interest rates. 

Myth 4 – You can’t negotiate with creditors. 

Contrary to popular belief, many creditors may be willing to negotiate payment plans and interest rates or even settle for less than the total amount owed, especially if it means they can recover some of the debt. 

Myth 5 – Bankruptcy is an easy way out of debt. 

Bankruptcy isn’t an easy way out of debt; it’s a last resort with lasting consequences. It’s a complex legal process that can significantly impact your financial future.

Once declared bankrupt, it stays on your credit report for years, making it hard to get loans or even jobs. Plus, the process itself is intricate, demanding meticulous paperwork and strict adherence to regulations.

Before considering bankruptcy, explore all other options and seek professional advice to minimise its impact on your finances. 

Myth 6 – You can’t invest while in debt. 

While it’s essential to prioritise paying off high-interest debt, it’s still possible to invest while carrying low-interest debt, especially if the potential return on investment outweighs the cost of the debt.

However, it’s crucial to carefully evaluate the risks and potential returns before making investment decisions. 

Photo credits: Pexels

Tolu Frimpong

Mouthy Blogger

Tolu is a Money Coach and Content Creator, passionate about helping others break the payday-to-payday cycle and achieve their financial goals, through the power of intentional budgeting, saving and investing. When she’s not talking about money you can find her spending time with her 3 boisterous boys.

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