Most adults have some sort of debt. Whether it’s a mortgage, student loan, car payment, or credit card bill, it’s hard to avoid borrowing money. Debt isn’t always bad; an affordable amount can help you reach your goals, such as earning a college degree or buying a house. It only becomes a problem when it grows to unacceptable levels.
Regardless of the amount of debt you have, you’ve probably heard a variety of rumors about the topic. Knowing how to separate fact from fiction when it comes to debt can help you make informed decisions about your financial well-being. Keep reading to learn about four common myths surrounding debt.
Bankruptcy Is the Only Option for Massive Debt
You have several options other than bankruptcy for paying off a large debt. Before considering bankruptcy, look into debt settlement, which is negotiating with your creditors to erase part of your debt. You could also consider developing a debt management plan. Debt management merges several loans into one large loan and often comes with a lower interest rate.
While having a large amount of debt can feel overwhelming, the only time you should consider filing for bankruptcy is when you’ve exhausted all other options.
Day Trading Will Land You in Debt
Many people think day trading always leads to debt, but this is a myth. The only way day trading puts you in debt is if you borrow to do it. When done correctly, day trading is a smart way to make money.
You may wonder, “What is day trading?” The answer is simple. Day trading is the act of buying and selling securities on the same day. Day traders rely on small fluctuations in stock prices to make money. It’s important to start small, do your research, and only invest risk capital — money you can afford to lose. If you follow these suggestions, you won’t end up in debt, and you may even turn a profit.
It’s Fine to Make Minimum Payments on Debt
Paying the minimum amount due on your debt will keep you in debt longer and cost you more in interest fees. While paying the minimum amount owed doesn’t have a negative impact on your credit score, it’s much better to pay more than the minimum every month. It’ll get you out of debt faster and save you hundreds, if not thousands, of dollars in interest.
You’re Responsible for All of Your Spouse’s Debt
You’re not responsible for any debt your spouse incurred before your marriage. While many couples choose to pay down their debts together, you’re not obligated to do so. However, you can lose that protection if you become a joint account owner on the account where the debt accrued or if you sign a loan’s promissory note.
Myths about debt abound, and it’s important to recognize what’s true and what’s false. An important part of achieving financial security is using debt wisely and avoiding it when possible. Believing myths about debt can cause you to act in ways that can hurt your credit score and trigger undue stress, so take a little time to educate yourself. You’ll feel better when you understand exactly what debt can and cannot do.