Last Updated on October 21, 2022 by Umer Mukhtar
Debt can be the best tool to get your financial life on track. However, many people don’t see it this way because of the fear that has been instilled into their minds. On one hand, everyone wants to be debt free and on the other hand, there is so much to recognise and appreciate when people do valuable stuff with the debt payment. There are numerous myths associated with debt payment. We will discuss them today so that you can know what to ignore when you hear certain things about debt
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Pay back your debt as soon as possible:
We often see people stressing over paying off the debt as soon as possible. It is good to stay debt free. However, sometimes there are many things more important than paying the debt payment back. People are always advised to keep money in their account for emergency situations and for fulfilling other important financial goals with the debt payment. Moreover, they can also use this money in order to invest somewhere. Keep paying off the debt little by little every month but never make it a priority as sometimes, it might not be a wise decision to do it.
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You cannot lend more than you can afford:
Whenever we want to borrow money, we are told that we can lend as much as we can afford. However, it is totally baseless. The lender can lend you upto 30% more than what you can afford depending on your income before tax.
Just because the lender has not set any limit does not mean you can borrow as much as possible. Think carefully and calculate how much you can afford. In fact, some borrowers want you to borrow a high amount so that they can receive the debt payment back with a higher interest rate. Therefore, take a wiser decision. For instance, if you want to lend money to a charity, you should know how much you should donate that you can easily pay back and know about direct debit services for charity.
You cannot check your credit score without lowering it:
All of us know that it is very important to keep an eye on the credit score. When we see our score going down, we can take steps to raise it. Luckily, everyone is entitled to receive more than 3 credit score reports annually. There is a misconception that when we check our credit score, we hurt our score and cause it to come down. However, it is not true. There are many such organizations that charge nothing for checking nothing for issuing the report
Debt can reduce your credit score:
Taking on debt can reduce your credit score but it is not always true. Infact, it can be a leading cause for you to enhance your credit score if you have successfully managed it. If you have paid off the debt in the specified length of time, you will definitely be able to give a boost to your score.