Some people mistakenly believe that debt is no cause for concern – they can pay it off conveniently every time their repayments are due, and otherwise just forget it exists. Something like a student loan for instance will be little more than a a monthly payment around the cost of a mobile contract or a TV package and as many of these are means tested you should always be able to afford the repayments as they come through.
So why worry about paying back your debt at all? What’s the big deal when it comes to being in debt? Here we will look at precisely why you don’t want to be in debt and why you should get out of the situation as quickly as possible.
It Costs a Lot: Being in debt costs a lot of money and the longer you take to pay your debt off the more you will pay in total as you accrue more and more interest. This then means that if you pay your debt off now, although it might sting in the short term, you will actually be saving yourself a lot of money for the long haul.
You Might Leave Debt for Others: In some cases your debt can be passed on to others if you fail to pay it off before you die. It’s impossible to inherit debt unless you were a party to it when the loans were taken out in most cases – but for anyone who was a co-signer on your loan this is a problem. Likewise if you die before you pay off secured loans this could mean your property is re-possessed and not passed down through the family as you might wish.
It’s Bad for Your Credit Rating: Your credit rating directly effects your ability to pay back loans as demonstrated in the past. This then means that having a lot of debt will be reflected in your rating and you could struggle to take out mortgages or car loans, to get new credit cards or even to rent properties.
It’s a Risk: At the moment your debt is manageable and doesn’t pose a threat. The smart thing to do then is to pay it off now while you know you are financially able to deal with the consequences. Otherwise you may find that the debt mounts up from other sources and you end up in over your head. Don’t be complacent – deal with your debt before you wish you had done so sooner.