6 Common Debt Myths Debunked
Debt can be an uncomfortable topic for many people, due in large part to the many debt myths floating around. At SharePoint Credit Union, we’re here to dispel those myths and help you understand debt so that you can live a more financially responsible life.
“All debt is bad.”
Debt can be a good thing when managed well, and it can even benefit your credit score. For instance, loans taken out to pay for college, buy a home, or start a business usually have low interest rates. And interest paid on these loans are usually tax-deductible. Plus, you can benefit from these loans in the long run. A college education will open new career opportunities for you, a home may increase in value, and you can make good profits with a successful business. Just make sure that you can afford to repay these loans, or else they will become bad debts.
“I can only get out of debt by declaring bankruptcy.”
Bankruptcy should be your last option. You might be able to take care of your debts through a debt management plan or debt settlement. A debt management plan combines multiple loans into a single loan, simplifying your payments and usually lowering your interest rate. A debt settlement is a negotiated agreement with your lender to reduce the amount of money you are responsible for paying back.
“I will be placed on a credit blacklist if I miss payments.”
There is no credit blacklist. Each lender will look at your credit file and decide for themselves whether they want to lend to you. Your credit file shows all missed or reduced payments, all payments made toward debts, and all debts you have paid off. Missing payments may harm your chances of receiving loans in the future, but it won’t totally ruin them.
“If I get married, I will be responsible for my spouse’s debt.”
You are only responsible for debts to which your name has been added. So, if you take out a loan together on a new joint account, add your name to an existing account, or co-sign a new loan, you will be responsible for those debts. But if you and your spouse keep your accounts separate, then you are not responsible for each other’s debts.
“I can just make minimum payments on my debts.”
While only making minimum payments on your credit cards and other loans won’t cost you late fees or harm your credit score, it is not advisable. Doing so will keep you in debt for far longer than necessary, and your interest rates will go up as a result. Interest rates can rise dramatically very quickly, making your debts harder to pay off and increasing the total sum of money you end up paying to settle them.
“Checking my credit score will lower it.”
Checking your credit score is considered a “soft inquiry” and does not affect your credit score. You can check your own score for free using a variety of financial services. You are also entitled to a free credit report every 12 months from each of the three national credit bureaus: Equifax, TransUnion, and Experian.
Still Have Questions? We Have Answers.
If you’re still confused about debt myths or are unsure how to pay off your debts, contact SharePoint Credit Union. We’re happy to walk you through any questions or concerns you may have. We also offer competitive loans with low interest rates to help you accomplish your personal, business, and financial goals. Contact us today.
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