Many people are scared of debt due to the various myths about debt making rounds and giving people the wrong information and ideas about it. These debt myths have spread erroneous beliefs and led to many people perceiving debt as a plague that they must avoid, and a lot more cheated because they do not have the right information.
What are Debt Myths?
Debt myths are false and wrong beliefs that people have about debt. Debt myths are misinformation and misconceptions that must be debunked for many people make bad money decisions because of the fear of debt. Debt is not all bad and can be used to your advantage to stay afloat in dire times.
This article will look at some debt myths and debunk them with the correct information.
1. Once you get married, you are responsible for your spouse’s debt:
Many believe marriage legally binds you to pay your spouse’s debt. This is misinformation. Marriage does not lead to the transfer of debt.
Merging of debt load can only occur if you are a cosigner of a loan for your spouse or you are included as a joint account owner for a credit card. In this case, you are expected to pay off your part of the debt. However, when separate accounts are handled, you are not obligated to pay off your spouse’s debts.
2. All debt is bad; avoid it at all costs:
I used to hold this school of thought, and many still believe in it. The belief that debt is bad and should be avoided at all costs is not entirely true.
Debt is not always bad. There can be good debt too. For instance, taking a loan to purchase your dream house, run your business, or complete your college studies. This is good debt that would bring positive results. Avoid getting into debt on liabilities.
3. Debt will take you to jail:
Many people do not take out loans because they fear going to jail. Having debt has consequences, but a jail term is not the reward for all debtors. This is because creditors need to be paid, and you will do no good to the creditors serving a jail term. Debt consequences include having your assets seized or being blacklisted by some creditors. This would make you lose your credit score.
4. Co-signing a debt doesn’t mean 50/50 payment responsibility:
It is a popular belief that co-signing a loan means you are responsible for paying 50 percent of the loan. That can’t be any further from the truth when your partner or cosigner goes bankrupt or is deceased. You will bear the responsibility of paying the debt in full plus interest.
5. Every debtor is a stupid and irresponsible person:
This is a prevalent myth and has made many people with debt ashamed and discouraged. This belief is the furthest thing from the truth. For everyone out there who took out loans to run their business, to go to college, or to handle life’s financial emergency, you are not a failure neither are you stupid. However, for every loan you take out, you must have a solid plan for repaying.
Debt is not necessarily bad. It can be good or bad depending on your reason for taking it and your smart money plans.
Being a debtor is not financial death – you need to learn how to manage your finances, and to achieve this, you must understand debt. Understanding debt will help you make more confident money decisions and attain financial independence.
