What is debt and how do i get rid of it
What is debt and how do i get rid of it
A debt is when you owe somebody money.
Debts get bigger every month if you are also being charged ‘interest’.
Interest is an extra charge on the original debt (the capital). Typically a personal loan from a bank is made up of Capital and Interest. The total of these is divided into monthly instalments and this is what a borrower pays back. The borrower gets the use of the money to purchase ‘whatever’ and the bank makes a return (profit) on their capital.
With this in mind you should always try to take advantage of any 0% interest loans or sales. But be aware that the (profit) must be somewhere and usually it is already included in the final price. It may be cheaper to borrow at a low interest rate and buy for cash somewhere cheaper.
The other problem with many 0% offers is they are ‘time limited’ By that I mean you may have gone to your local PC shop and taken a nice shiny laptop away for 0% interest or even Nothing to pay for X months. Well, those X months will soon go by and you will have got over the good feelings you have for the laptop. Now the shop (credit company) want their money. All of it. And if not they will let you pay over x months at X % interest. Usually a high rate. This is how people often get into debt without ever meaning to.
They went to the Sofa shop or PC shop with the money to buy their items and were persuaded not to by the salesman. He will be getting an enhanced commission for people that take the finance option so will make it sound the right thing to do.
Before you know it you are in debt.
This kind of thing will happen often without you realising. You go to buy some clothes and they say ‘why not take out account card and get 10% off’. Sounds great idea, 10% off..
Soon that card will be another monthly debt with interest!!
The only way to get rid of debt is to like either within your means, which we know is very hard. Or to budget for things and save up most of the price. Then try and take advantage of the ‘deals’ when they are offered.
There is nothing wrong with the 10% sign up discounts if you clear the cards every month. Just a word of caution here, if you were to lose your job and still had a card debt balance it could be a problem for you.
So, what is debt? Debt is the means by which society has grown beyond it’s resources. It’s the tool a government uses to control it’s citizens behaviour.
Many years ago we all worked, saved up, and purchased all of our life. Then with the advent of cheap labour workforces in the East and redundancies in the West the powers that be had to invent a new way that we could all afford to keep spending. They invented easy credit for the masses.
This worked well for decades until the recent credit crunch when the supply of money was turned off. Now we are all in debt, even the government, and it will take a long time to get out of debt.