How do you feel about debt?
Personal loans are a quick and easy form of financing compared to a range of other options in the market. There are many reasons to apply for a personal loan and one of the more popular options out there is to apply for a loan to consolidate debt. Your personal reason for applying for a loan is entirely your own but whatever the motive, a debt consolidation loan can help you achieve your needs and wants, ambitious goals and aspirations.
Definition of a debt consolidation loan;
With a debt consolidation loan you can combine all your debts; car loans, student loans and credit card debt, all into one easy-to-manage loan, with a fixed rate, fixed payment and fixed period upon which you can erase all your debt woes.
Debt itself is perceived differently by different people. It is one of them taboo subjects that we all too often avoid discussing. For some, debt is a cause of anxiety or even embarrassment, with the guilty admission of our current debt situation. For others, debt is used to their advantage; from financing new cars or holidays abroad through to student loan and mortgage financing.
Remember not all debt is bad.
How do you feel about debt? Is it something you avoid at all costs? Something that acts as a fall-back/emergency to help you in times of need? Do you depend on debt to help ends meet? Or do you utilise debt to your advantage ie to make things happen now and pay for it down the track? We take a step back, looking at the range of perspectives one may have on debt and how it is that you can use, manage or organise debt to help shape and inform your understanding and attitude toward debt.
Perspective #1 Debt worries me, I fear debt
Many people view debt as being bad, and a burden or obstacle that stops us from achieving our personal finance and lifestyle goals. There is the perspective that a debt consolidation loan does not address the issue at hand. Debt has been created. And debt is difficult to overcome and rid ourselves of, particularly if we cannot amend our habits and understanding surrounding personal finance.
For a debt consolidation loan to prove successful the applicant must make every effort to remain debt-free, or risk returning to square one and being burdened by debt once more. With a recurring debt problem, a debt consolidation loan simply shifts multiple streams of debt to one avenue. Now this isn’t altogether a bad thing, but if the matter of living beyond your means persists then the overall issue is not addressed. Put another way; it is like rearranging the deck chairs on the Titanic, and we are not exactly correcting our personal finance habits and understanding of the persisting pitfalls that are holding us back.
Remember not all debt is bad.
Perspective #2 Debt is only created in emergency situations for me
This perspective is for the person who avoids debt as best they can – using it only in emergency situations. Think of large unexpected costs here like medical costs, funeral costs, unexpected travel among a raft of other costs that may not be anticipated. There is the establishment of an emergency fund which may work in this situation. If however you do not have an emergency fund or if the fund does not cover the financial dilemma at hand then it may be that we need to go into debt to cover our emergency situation.
This perspective perceives debt with a reluctant touch. That we must do our best to avoid debt, but if we absolutely have to, then we can utilise debt to cover our finances in times of desperate need. And we are talking major situations here – medical costs etc as opposed to an impulse purchase that is whipped onto the credit card.
This is part one of our ‘How do you feel about debt?’ blog. To continue reading part 2 please follow the link.