common myths about debt
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Every society has a few common myths about debt, usually just a slew of misconceptions and limiting beliefs spread from one age group to the next. You must have heard a few, I’m sure. Most of these general beliefs are often untrue or, in the best of cases, significantly exaggerated.

A lot of us hate getting into debt. The thought of being caught up in an endless cycle of taking out loans and paying them off makes debt our last resort in times of financial disaster. The truth is, having debt is frustrating. 

You spend all your time worrying about how you will pay your debt off and even struggle to make it work. However, society has contributed a huge chunk of our relationship with debt. Debt is not at all that bad, and it comes in handy when you need to keep afloat when money is tight. 

Over the years, I have heard some very limiting beliefs about debt that most people still hold on to unknowingly. Family and friends have imposed some of these debt myths on us, and their opinions around debt have sat with us for the longest time and heavily impacted our overall relationship with money.

Common myths about debt

Here are the top 10 debt myths you need to debunk today.

1. Couples are responsible for their spouse’s debt

Most married couples, especially newlyweds, fall for this debt myth. But that’s just what it is: a myth. You are not responsible for paying off any existing debt your partner has before your union. 

However, if you both opened a joint account or are the cosigner on a loan with them, you must contribute your share towards paying off this debt. 

For example, in the unfortunate demise of your partner, while you are a cosigner of debt both of you took out, you will have to pay for this debt. You are only responsible for the debt you actively engaged in with them. 

2. You will go to jail if you do not pay off your debt

common myths about debt

Are you avoiding debt because you do not want to risk going to jail for defaulting? Perhaps you want to take off a huge mortgage, but the idea of being unable to pay and serving jail time doesn’t sit well with you. You are not alone. 

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A lot of us tend towards this debt myth. You have to know the consequences surrounding your taking out a particular debt, for example, your assets being seized or being blacklisted by your creditors.

Your creditors stand to gain nothing when you are in jail because it will be impossible to pay them when you are serving time.

3. Lifestyle assets are good investments to use as debt leverage

This is a common debt myth and a mistake I see many people making. Don’t be quick to put down your car or house as leverage in case you cannot pay your debts. 

Many options are available, and you can seek counsel from a financial advisor on how best to approach this situation. Remember, you worked so hard to earn the things you have, and it’ll be a terrible idea just to give in and throw them away like that. At best, this should be your last resort.

4. You are in debt because you are stupid and irresponsible

This is a very common debt myth that you need to debunk today. It has made many people walk around with this guilt and shame that they are financially irresponsible and don’t know how to manage their finances. 

If you are a victim of this, quit beating yourself up. Taking out debt to start a business or help yourself in a life emergency doesn’t mean you are stupid and irresponsible. However, if you take out debt to waste it, you need to make better financial decisions. 

5. Debt is dangerous- avoid it or pay it off as fast as you can

People carry this thought of debt being bad with an avoid-at-all-cost mentality. We believe that having debt means digging our own financial pitfalls and looming financial disaster. This is only half true. 

Debt can be good too. Say you are taking out a student loan to support your education or finally buying your dream house. This is great. The high-interest rates and negative tax benefits attached to debt make it dangerous, for example, when you max out your credit card.

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6. If someone leaves the country, their debts will automatically go away

I hear many graduates who want to pursue higher learning overseas talk about how easy it will be for them not to have to pay their student loans from abroad. 

If you also believe that your debts will automatically go away when you move abroad, you must know that this debt myth is half true. If the company/ financial institution you took out a loan from has branches overseas, they will track you down and see to it that you pay them back.

7. If I loan money to a friend or relative, I will be helping them

When your friend or family is going through a financial crisis, it is good to help them and chip in with our money as we can. However, do it out of the kindness of your heart and limit your expectation of them paying you back. 

Often, I hear people talk about how their friendship with someone ended abruptly when they loaned out money to them. It’s either the person avoided them once they could not pay or kept coming back for more, showing a total lack of boundaries around your finances. 

If you think you are helping your friends or family by giving them loans, you are actually doing them and yourself a disservice.

8. Creditors can always sue you for debt

If you default in payment, your creditors will have to take you to court and sue you to get their money back. They are entitled to have their money, and the justice system grants that to them. 

However, for this to take effect, your creditors need to actively pursue you to pay them their money within the expected time period. For example, if your creditors take you to court for a debt that has gone over two years, the court will not give them this money back. You will not have to pay. 

There are statutes of limitations towards debt. If you are a creditor and you notice any signs of your debtor’s evading their responsibility, ask the court to compensate you immediately.

9. Co-signing a debt means 50-50 responsibility

When you cosign a debt, it means that you agree to get into this debt jointly with another person, sometimes as an endorsement. It doesn’t, by any means, mean that you share 50-50 responsibility. This is a debt myth that many people still believe. 

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If you have any spending amount left to write off this debt, your creditors will contact either you or your partner to pay it off in case one of you goes bankrupt or is deceased. Do not think that you will only pay your share and walk away.

10. Debt kills young businesses

This debt myth has barred many young entrepreneurs from starting successful businesses and living out their dreams. People often dismiss the thought of taking out loans or borrowing from family or friends to start their businesses. 

While this is good, you need to evaluate your business idea and if it is worth the risk, go for safe debt options. 

For example, you can take out loans with low interest and give you positive tax benefits. You can apply for small business loans from a money lending institution and start your business today.

Conclusion

Having debt is not a financial death sentence. Do not let what society or your family has taught you about debt limit you from living a financially stress-free life. You need to learn and unlearn some of these limiting beliefs that prevent us from having a healthy relationship with debt. 

You do not have to worry about debt for the rest of your days. Know what these debt myths are and let go of them. Debunking these debt myths is very important and liberating to your financial goals

You will become more confident about money and make better financial decisions. Debt is one of the biggest hurdles in our journey toward financial freedom. If you can understand it better, it will be easier to work your way around it and realize financial independence.

About the author

Vani has a keen interest in investments, entrepreneurship, and small businesses.

Vani Ongaya

Vani has a keen interest in investments, entrepreneurship, and small businesses.