Don't Get Into Debt

There are situations that necessitate debt including emergency situations in cases where you do not have any form of an emergency fund. While debt may be the best solution to your short term financial problems, there are so many reasons why you should not get yourself into debt. You do not want your creditors sending b2b debt collection services your way.

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Encourages spending

When you take on some debt to purchase an item that is beyond your reach, you are actually spending more than you earn. When you make this a habit, the long terms effects pile up and leave you in a very unfortunate financial situation. Instead of taking on debt, try using savings and investments to purchase things that may be out of your reach in the short term. This is especially important for consumption items or personal expenditure that does not have a financial return.


Health problems

It starts off as a small loan to take care of some expense and before you know it, you may not live without debt. This can lead to stress and ultimately such health problems such as ulcers, high blood pressure and other lifestyle diseases. This is bound to happen when you can rarely meet your debt obligations and are therefore ether forced to borrow more to pay existing debt or to file for bankruptcy. The resulting worry is what leads to all these health problems.


Credit score

Continuous borrowing can hurt your credit score limiting your options when in dire need of finances. Late repayment, missed instalments, paying lower amounts than what was initially agreed upon and taking up too many loans may eventually lead to a lower credit score. Since your credit score is also linked to such things as your car insurance, you will end up paying higher premiums. Therefore your credit rating can affect your life even when you are not looking for a loan.


Waste a lot of money on interest payments

The interest charged on loans may seem minimal in the short term but over time, you end using a lot of money paying it up. This money could be put into better use such as saving for your retirement and investing. Besides, you may eliminate some necessary expenditure such as contributions to your 401K in order to meet your debt repayment schedule.


Jeopardise relationships

Poor financial control and habits may have a negative effects on your relationships with family members and even friends. When you have too many loans, you may not have enough money to take care of your family and your partner may not be at a position to take up any extra expenses. This may breed resentment and lead to relationship failure if not addressed on time.


Financial goals

With so many loans to pay up, you may not be able to achieve your short and long term financial goals. This leads to stagnation in life and this can also be a source of great stress in a family. Investments and savings are usually one of the first things to be eliminated in cases of financial distress despite their role in securing your financial future.


Constructive debt is allowed but when debt starts getting in the way of achieving your financial goals, it is time to get back to the drawing board and get things in order.