Why debts are not bad – Consequences – How to pay

Most said it was a way of financing their lifestyle; for others, it was because their income did not reach them to reach the end of the month and in that way they completed the expenses of personal or family support.

One of them told me that he used his cards to pay for trips, that he was happy to see his family enjoy and that since the future was uncertain, it was best to live in the moment regardless of debts.

My partner said that the debts are not bad, that we work all year, that we spend little time with the family and what if we die, nothing will take us. It was best to take advantage of credit cards and credit to finance travel and our lifestyle.

He argued that if he had postponed his travels until he could save enough, it would have been too late and a great waste of time.

Actually, it left me thinking a lot and I decided to take the risk of getting some debts, although I knew and taught that it was best to live free of them.

Why debts are good

The economic model of the life cycle is based on people making decisions about consumption, savings and debts. For young people, at the stage when the income is low, they make use of credit to incur debt and consume more than they can afford with the expectation that in the future the income will be higher and they will be able to pay the debt. This allows people to have a more stable consumption over time, but without being able to save much.

For some people, debts are not bad because it allows them to access many things quickly without having to save money to pay them. They are willing to take the risk of being in debt.

Buying a house through a mortgage loan is one of the ways to get hold of an estate and have an investment.

Many young people and families use credits to pay for their university studies.

Another reason in favor, is that if you ask for a loan for a business or investment, you can leave enough money to pay off the debt and make a profit.

Also, to be susceptible to a mortgage or other type of credit you need to have a credit history.

There are many reasons that people can give why debts are not bad. However, the risk of losing your income or losing control and being overwhelmed by debts exists.

My experience with debts (second time)

After that talk in my work, a few weeks passed and I got to work; I applied for a car loan, they gave me a credit card, I was the subject of a payroll loan and other personnel.

After having access to credit, new possibilities opened up.

The first thing I did was to change my old Renault Clio 2003 for a 2013 Mazda of a 5-year funded agency. That summer, we took vacations through the beautiful Mexican Caribbean and my family went to Disneyland in California, United States.

The next three years we had more vacations to beautiful places in Mexico, Guatemala and the United States, we bought clothes and ate often away from home, etc.

In those years, we stopped controlling our personal budget and the debts were increasing due to living a lifestyle that we could have with our income and without knowing what would happen in the future.

In 2017, due to adjustments in the company, I lost almost 50% of my income, which left accumulated debts for more than USD 35,000, not counting my mortgage credit.

Why debts are bad

To date, I have taken control of my money again , in two more months, I will have all my debts paid, including my mortgage loan of more than $ 60,000 USD. However, the last two years have been horrible as debts really have consequences for the person who contracts them and for the family.

When a person experiences financial problems, he will begin to experience financial stress , which is associated with low levels of self-esteem. It increases the pessimism of life’s perspectives, reduces mental health, increases depression and hostility.

Consequences of debts

As financial problems increase, couples may become concerned about their financial affairs, leading to anger, frustration, guilt and discussions about money, the likelihood of family discord and divorce increases.

Financial problems negatively affect health because when you do not have enough income or when payments increase and accumulate, treatments or the purchase of medicines are delayed.

As medical expenses increase, one has to resort to personal loans or the use of credit cards, which causes people to end up borrowing.

Financial concerns trigger financial stress and anxiety in people.

Debt consolidation, is it convenient?

The consolidation or reunification of debts by personal credits, credit cards, bank credits or money loans offered by some banking and credit institutions is to unify all your debts or credits into one, with the promise of paying a small payment per month, with low interest

Debt refinancing, the only thing it does is give you a break to avoid paying large sums of debt per month, but it is only a mirage to make you believe that you are solving your financial problems.

In the end, by refinancing your credits, you will end up paying much more in interest for many years.