Common Debt Myths
There are a lot of myths surrounding all aspects of debt, and a lot of them are perpetuated by money lenders. Most people are aware that being heavily in debt is not a good place to be. But there are also some times when debt is needed to build up credit ratings and help with cash flow problems.
Everyone is in DebtMany people will excuse their debt habit by saying that everyone is in debt and it is a necessary evil. This is one of the many common debt myths. Although a huge number of people in the UK are heavily in debt, many do manage to handle their debt responsibly. Problems will occur with both irresponsible lending and borrowing. The goal and ideal for most people would be to be debt free, at least by the time they retire.
There are just as many people who are debt free in Britain, or are working there way towards it, as there are people with serious debt problems. Using the excuse that everyone is in debt only enables people to dig themselves deeper into debt. Not everyone pays with credit cards or takes a loan out when short of money, although it may not seem like. Using excuses such as these will only eliminate responsibility for one’s own debt.
All Debt is Bad DebtThe statement all debt is bad debt is not necessarily true. There are debts such as mortgages, car loans and overdrafts that are necessary. For example mortgages are usually a cheaper option than renting, it is also usually an investment in the future. Setting up an overdraft can be useful in order to avoid missed direct debits and standing orders, and to avoid the penalty charges that will accrue if this happens.
Bad Credit Ratings are for LifeOne of the many common debt myths surrounding credit references is that bad credit ratings are with you for life. Bad credit records have a limited life span on your personal credit file, usually around six years. There are many ways to rebuild your credit rating, and you can have a spotless credit record within a very short space of time.
Bad Credit means I Cannot BorrowBad credit will usually mean that you will not get offered the low interest rates that people with good credit ratings can receive. Lenders will look at your credit rating and use the information to decide if you are a good lending risk or not. In most cases a poor credit reference with regards to credit card defaults will not hamper your chances of gaining a mortgage. Taking on high interest debts such as store credit cards, and then making prompt repayments, and more than the minimum payments, can see your credit record improving.
Debt Collectors Can Turn up at my DoorDebt collectors are not allowed to appear at your door without your permission. Debt collectors have very limited powers when it comes to collecting debts and are not allowed to harass or embarrass a debtor in any way. Agencies will sometimes use the trick of saying that they will be sending someone to call on you at a specified date and time. By agreeing to this you have then given permission to allow the debt collector to turn up. If a debt collection agency does try this simply tell them it is against the law and you have not given permission for this to happen.
Bailiffs can Break into my HomeAgain this is another common debt myth. Bailiffs do not have any legal right to break into a person’s home, and they cannot enter unless the owner gives permission. They can enter the home if the door is unlocked or through an open window. They can also break into a home if they have been allowed into the home previously, and a debtor has not adhered to a debt repayment agreement.
Debt Advice Costs MoneyThis is also not necessarily true; if debts are becoming uncontrollable then you should not have to amass more debt to get rid of them. There are some very good debt consolidation and debt advice agencies that will not charge fees to help people eliminate their debt. There are also thousands of companies that claim to eliminate debt or rebuild credit ratings. These companies will advertise on websites and in newspapers and they will usually charge a fee. Always beware of companies that claim to rebuild credit ratings for a fee; there is little they can do that the debtor cannot do themselves.
Always beware of people who advertise debt help and ask a fee for doing so. Free debt advice can found at local Citizen’s Advice offices or from credit advice offices. Common debt myths are usually perpetuated for a reason, usually to keep the debtor in debt, and to make money for others.