Are you facing the debt heat?

Today, most big financial dreams such as buying a car or buying a house are easily achievable because of easy loans available to realise these dreams. The truth is, you cannot live without debt – or at least it is difficult to not have debt. Lenders have made debt quite important by inventing the idea of credit scores and concepts of secured and unsecured loans. Although credit score is something that helps lenders and creditors determine if you can be trusted with a credit account. However, in order to have a credit score, you will need to be in debt and display good behaviour in paying it back.

Here are some signs to know if you are getting into a debt trap. Watch this video and if the answer to any of the questions is a “yes”, chances are you have a debt problem. 

It is very tempting to live EMI to EMI and go mindlessly into purchasing gadgets, gizmos and good just because they are available on EMI or there is a discount. You need to understand that it is up to you to be careful about how much money you will borrow. You need to make the right choices because if not, you can end up compromising your future. It is important for you to determine if debt will bring you financial wealth or burden.

For instance, borrowing to buy a house in which you plan to live is considered to be a good loan. The house is an asset that you get to own once the loan tenure ends. In contrast, borrowing to upgrade to the new iPhone 7 is a bad loan as the value of the phone depreciates the moment you buy, even when you service the loan for a much longer period.

While borrowing money is not necessarily something that you should avoid, you should always be careful to loan only what you can afford. When you end up borrowing too much, it might be more difficult to deal with debt. To check if you are heading into a debt trap, watch the video. To know how you can come out of a debt trap, write to us at letters@outlookmoney.com