Five common debt myths: busted!
If you've ever been in debt, you've probably heard loads of different things about what you should and shouldn't do to get out of it.
A lot of that information may be correct, but it's likely that you've also been told things that are untrue or at least a bit misleading.
So we - Gregory Pennington - are here to 'bust' five of the most common debt myths we hear. A bit like 'Mythbusters' on the Discovery Channel, but with fewer explosions - and more sensible tips about debt.
Myth 1: You're alone
Reality: you're not alone.
A debt problem can make someone feel isolated - perhaps because they think they're the only ones going through it, and nobody else will really understand - but you're not alone.
Somebody is made insolvent (meaning they have serious debt problems that they can't resolve themselves) every four minutes and forty-two seconds in this country, according to Credit Action.
If you're looking for help, in other words, there are experts you can talk to who deal with people's debt problems every day. Click here to talk to a professional.
Myth 2: People get into debt due to spending irresponsibly
Reality: there are so many more factors.
Obviously, everyone's debt situation is different, and some people do get into debt because they've overspent (it's easy to get carried away). Plenty of others, however, get into debt problems due to factors beyond their control.
For example, people can get into debt because they've lost their job, got divorced, suffered from illness or injury - or simply because of the rising cost of living along with widespread wage freezes in recent years.
Myth 3: That joint debt is only half mine
Reality: you might have to repay more than half.
If you're jointly and severally liable for a loan or credit agreement you've taken out with another person, your creditor will be able to pursue either of you for the full amount of the debt.
That means if your partner is unable to pay their half, it's still your responsibility to make sure it all gets paid - and vice versa.
Ideally, you'll both repay your fair share of the debt, but life doesn't always work out as expected. If something goes wrong, each of you is responsible for all of it.
Myth 4: It's OK to just make the minimum payment
Reality: you should try and repay as much as you can.
Making the bare minimum payment on a loan or credit card means that you're only slowly chipping away at your debt - especially when you consider how much the interest is adding to it every month.
So you should try and overpay by as much as you can realistically spare. Repaying debts as quickly as you can will cut down the amount you pay in interest overall.
Just be aware that you might incur an 'early repayment charge' if you repay a debt too quickly (only for certain debts: check your credit agreement to find out).
Myth 5: I can just borrow more to repay what I owe
Reality: this can get you into a cycle of borrowing and debt that you'll struggle to escape from.
If you take out a loan to repay a credit card, for example, you will pay off the card - but you'll still owe just as much. In the right circumstances, this can help you get the debt repaid, but if you're struggling to make ends meet, it's not a good idea.
Instead, you should seek expert debt advice. One of our debt experts could go over your situation with you and advise you on the right approach to take.
If you'd like to find a way out of your debt problems, you can use the free debt solution finder on our homepage. Click here to use it.
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- 0161 669 8925