Common Debt Myths Debunked
There is no denying that being in debt can be a worrying situation. However, instead of fretting about what has happened, you need to look toward the future and you need to make a plan to get out of debt as soon as you can. This will involve a good chunk of research. However, you need to make sure you don’t fall into the trap of believing all of the myths that are out there regarding debt. With that being said, we are going to debunk some of the debt myths that people believe, so let’s take a look…
Debt advice is too expensive – Debt advice can be expensive, but it does not need to be. It all depends on where you source it. There are a number of debt advice charities, which will help you find your way out of the situation you have found yourself in. You should never pay for debt advice; take advantage of the free solutions that are available.
Once you are bankrupt, you are always going to be bankrupt – This is another myth. If you do decide to file for bankruptcy, this will generally last for around twelve months. At this point, you are going to be known as an undischarged bankrupt. This will then be shown on your credit file for six years. During this period of time, you will usually find it a lot more difficult to get credit. However, once the six years have passed, this should be removed from your credit file completely.
Your bank won’t help you – If you are experiencing severe debt problems, your creditor may actually help you. They may give you a break from your repayments, they may reduce your repayments temporarily, or they may agree to freeze the interest. The sooner you talk to your creditor, the better.
I am only responsible for half of my joint debts – If you have taken out a secured loan with your partner, this does not mean that you have 50 per cent of the debt. If your partner does not keep up with the repayments, it is going to reflect badly on you too.
Paying the minimum is good enough – While paying the minimum payment each month is not going to be a problem for your credit card providers, it could be an issue for you. This is because of the interest that is going to be building up each month. All you are doing is prolonging being in debt, so you should always try to pay off more than the minimum.
You will go to jail if you do not pay your credit card bill – A lot of people worry that they are going to end up in prison because they have defaulted on a personal loan or credit card. This cannot happen. You may end up being issued with a County Court Judgment (CCJ), which simply states you have to pay a specific amount towards your debt. This will show on your credit file.
You don’t need to have a plan – This is where a lot of people go wrong with regards to debt repayment. They simply state that they are going to pay off as much as they can per month. However, when you do this, you will find it takes longer to get out of debt and that you are probably still spending too much. You need to put a spreadsheet together that states your incomings and outgoings for the month, so you can see where savings can be made, as well as determining the money you have left over each month. This will enable you to pay off a certain amount of money every month, and you will also be able to work out when you will be debt-free.
Using an overdraft is expensive – Although there is typically a charge in place for using your overdraft, you will find that most building societies and banks will give you a buffer, meaning you can dip into your overdraft free of charge so long as it is under a certain amount.
As you can see, there are a lot of myths out there about debt. Hopefully, you now know the truth from the lies. You should now have the information you need to start looking into putting a plan together to pay off your debt efficiently and intelligently.