Why We All Have the Wrong Idea About Debt
When you think of debt, you probably think of a negative situation. If someone says they’re in debt, then you probably imagine them in an unstable financial situation that is difficult to get out of. Perhaps they’re using loans to pay off loans or maybe they’re paying for luxuries using credit instead of their own hard-earned cash. It’s a difficult pit to climb out of, and debt is often associated with bad financial management.
However, there are some things about debt that can be positive. In fact, many of us have the wrong idea about debt, and in this article, we’ll be discussing why we have the wrong idea and how we can change the mentality surrounding loans, debt and credit.
Debt can be good
No, that’s not a typo! Contrary to popular belief, debt can be a positive thing. Picture it this way: when you purchase a home, aren’t you considered in debt because you take out a mortgage? How about your student loan? Isn’t that a positive form of debt? And let’s not forget taking out money to purchase a car either. These are all situations where debt is seen as a positive thing. The reason? It has a different label.
People rarely say they’re in debt because they went to school. Instead, they say they have to pay off a student loan. It sounds far more professional and gives people something positive to associate that debt with: education. Similarly, when someone purchases a home, the positive thing is actually owning property. They don’t think about the insane debt that they’re technically in, they just think about the house they bought and how much their life will improve after moving in.
Even if you’re just looking at websites like cashloans.co to find the best deals for a personal loan, having a use for the money you’re borrowing can completely change someone’s perspective. Are you in debt because you borrowed money to start a business? Absolutely no problem. Have you accumulated debt because you need to pay for car repairs? Again, no one sees a problem with that and you can consider them both examples of “good” debt.
Where there’s good, there’s bad
Of course, good can’t exist without the concept of bad. Bad debts are what most people associate the word “debt” with. For instance, bad debt would be something like purchasing a new games console with your loan or taking a holiday with money borrowed from your bank. These are common examples of when credit is misused and more often than not people forget about these debts and end up incurring ridiculous interest rates on something they thought was innocent.
To summarise, as long as you borrow money for a purpose, it’s totally acceptable to be “in debt”. However, if all you’re going to do with the money is make yourself happy or waste it on something, then you may want to rethink the necessity of taking out a loan. Learn the differences between good and bad debt, and your view on personal finances will change completely.
