Seven Debt Myths That You Can Forget About Right Now
There are so many misconceptions about debt that it’s easy for people to believe them. Then, they end up getting into financial trouble because they think they’re doing the right thing when they’re not. For my UK friends, these seven myths are some of the biggest ones out there and they deserve a firm debunking.
All Debt is Bad Debt
Debt is a heavy word; it conjures up images of bailiffs and constant worry. Or having to eat out of the reduced aisle for months on end.
Some debt can be good news if you handle it well. You need to have credit to get a credit rating, for a start. Having a decent credit rating enables you to get mortgages, loans, and overdrafts when you need them. A mortgage is a good type of debt because it’s often actually more of an investment.
Debt Advice is Expensive
Of course, some debt advice providers do charge for their services. Here’s the thing, the fees are reasonable and are often worth it. Especially if you end up reducing your debts or extending your repayment period. Try Creditfix if you’re worried about your debt – you’ll feel much more in control.
Overdrafts are Expensive
The humble overdraft is among the most common form of debt in the UK. Many residents are in and out of their overdrafts regularly. If you’re always dipping into your “allowance” and you’re getting charged for each day that you’re in the red, then you should look around for another account. One that doesn’t charge (or only charges nominal amounts) for arranged overdrafts.
Joint Accounts Mean Only Half the Responsibility
This is a pernicious misconception. Both people in a joint account or joint debt are responsible for the full balance. If the other person bails out, you’re liable for the whole amount, not “your half”.
Defaulting on a Credit Card Means You Go to Jail
You really can’t go to jail because you don’t pay your credit card debts. You can, however, end up with a County Court Judgement (CCJ).
The CCJ will say that you have to pay some or all of the debt and if you can’t make the payments reliably then you could get an “attachment of earnings”. An AoE is when some of your salary is taken at source and passed onto your creditors. If you owe a large amount, you could get a “charging order”. This is when your home is sold and your creditors take a portion of the proceedings.
Bailiffs Can Enter Your Home
While bailiffs seem scary, they don’t have any powers! They can’t force their way into your property – they can only come in if a door or a window is open. The exceptions to this are criminal fines or unpaid tax or VAT. This is only when all other attempts to recoup the money have failed, though.
You’re Bankrupt Forever
Bankruptcy is a serious step and should only ever be taken as a last resort. However, it only lasts for 12 months and is on your credit file for six years. Once the first year is up, your credit rating is in need of some repair. While this is true, you’re no longer bankrupt.
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Did you believe any of these debt myths before?
Let me know, til then–cheers m’deres!
Nancy Polanco is a freelance journalist, lifestyle content creator, and editor of Whispered Inspirations. She is a proud Mom to Gabby and Michaela, and wife to Darasak. Having worked as part of a health care team for almost a decade, Nancy is happy to be back to her passion. She is a contributor to the Huffington Post, TODAY’s Parents, and an Oprah Magazine Brand Ambassador.