Debt has become such a dark and gloomy word that sends shivers down your spine. We all hate reading it, and it’s even worse when you’re in it. The typical view of debt is that it is the worst thing that can ever happen to you and your finances. Debt leads to bankruptcy, which means you lose all your money, right? 

Well…not exactly. There are lots of things relating to debt that the average person probably doesn’t know about. The aim of today’s post is to (hopefully) educate you on debt, so you can understand more about it and the key things surrounding it. So, without further ado, here are a few things you didn’t know about debt:

Not all debt is bad

That’s right, some debt is good debt. The biggest misconception about debt is that it is always a negative thing. In fairness, that’s because every time you hear about debt it is in a negative sense. We’re constantly bombarded with stats on how much debt people are in and the leading causes of debt, etc. 

Yes, most debt is bad, but not all of it. Getting a mortgage to buy a house will put you in debt, but is that a bad thing? No! Likewise, getting a student loan puts you in debt, but are you in bad debt? Nope. In both scenarios, you need to be in debt to access something beneficial. You have a mortgage to repay, but you now own a house and are on the property ladder, unlocking so many new opportunities. You’ve got a huge student debt to pay off, but you also have a degree that can help you find a well-paid job that sets you up for a successful life. 

Debt is only bad when you owe money and see nothing positive in return. When you borrow money but see long-term benefits, it is good debt. 

Debt collectors can’t harass you

When you owe a debt, you can have debt collectors contacting you to make payments. This is legal, and they are entitled to send you letters, emails, or to call you to remind you that your debt is due. After all, you owe money to someone, and they have been hired to collect that money from you. 

However, what they can’t do is harass you at home or at work. This is a problem that a lot of people face when they are trying their hardest to repay debts, only to come under constant harassment by debt collectors. There are campaigns to stop debt harassment as it is not technically legal at all. If you tell a debt collection agency not to call you at work, they can’t keep doing it. They also can’t come to your home and make threats. All they can really do is remind you that you owe money, and ask for you to pay it. 

So, if you are in debt, and you have collectors constantly barraging you, they can’t technically do this. As such, you could actually take legal action against them to stop them from coming to your home or constantly calling you after you have asked them not to. 

Debt impacts your credit report

Being in debt will have a direct impact on your credit report. What’s interesting is that this can be both positive and negative. Debt can have a positive impact when you repay it quickly. Credit authorities will notice that you have borrowed money and then made your payments on time to clear the debt. As such, they deem you very creditworthy. After all, you have displayed the perfect traits of a borrower! Therefore, your score is likely to improve. 

Debt has a negative impact on your credit report when you don’t make repayments and it keeps getting bigger. Or, when you have multiple debts to lots of different organizations. In these cases, you are clearly not creditworthy at all. You’re showcasing the traits of someone that can’t be trusted to borrow money; you’re unable to repay what you borrowed, and you are in debt to lots of different people. Thus, your credit score will decrease and stay pretty low until the debts are repaid or cleared. 

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There are ways to make debt repayment easier

When paying your debts, the obvious course of action is to pay little chunks whenever you can. However, there are ways to make debt repayment much easier when you are struggling. A couple of these ways include:

• Debt consolidation
• Debt restructuring

Debt consolidation is when you borrow a chunk of money to repay multiple debts in one go. The idea is that you consolidate those debts into one loan that’s easier to repay. Debt consolidation loans have agreeable interest rates, and you don’t have to worry about multiple organizations berating you to pay them – or dealing with their individual interest rates and fees. 

Debt restructuring is where you contact the lender and ask them to restructure your debt. This could mean that they change your monthly payments or reduce your interest rates. The idea behind this is that you show the lender you are willing to repay the debt, but you can’t keep up with the current terms. If they want the money, they will have to restructure. 

Other methods exist, so be sure to do your research if you are struggling to pay your debts. 

Bankruptcy doesn’t mean you are broke

The misconception behind bankruptcy stems from Monopoly. Unlike the board game, being bankrupt doesn’t mean you have no money. Instead, it is where you clear your debts. You file for bankruptcy, and you will pay a set amount to your lenders, decided by the court. So, you still have money, but you are just bankrupt. This means you can’t borrow money for a set period, your credit report has your bankruptcy on your file for years, and it’s a chance to rebuild. This is often seen as the last resort when you are in debt. 

By now, you should have learned a few new things about debt that you didn’t know before. It is a scary topic, and you should avoid it wherever possible. If you do end up in debt, make sure it is good debt!