When it comes to debt, ideally you will not need to take on any debt at all. However, this may be unrealistic, as borrowing money may be the only way you can buy a house, or a car, or study at university.
If you are going to borrow money, then it is important to borrow for the right reasons and to make sure you can afford to repay the loan.
However, if you have taken out a loan, and are struggling to make the required repayments, then make sure you seek help at an early stage. If you delay seeking assistance, your problems could get worse, and you could find that your debt worries lead to you struggling to sleep, or could start affecting your relationships with family and friends.
Before taking on any new debt commitments, you would do well to visit the Debt pages of Wonga’s Money Academy. Here you will find two videos, ‘What Is Debt?’, and ‘What Is Good Debt’?
The first of these two videos explains:
- Debt is money you have borrowed and need to pay back later
- Most people will experience debt at some stage of their lives
- You will always pay back more than you have borrowed, as lenders charge fees and interest on their loans
- There are ‘good’ and ‘bad’ reasons for borrowing money
The second video covers issues such as:
- Good debt should be thought of as an investment in your financial future – by taking on this debt, you should become better off in the long run. As an example, you might borrow to fund your university education, safe in the knowledge that graduates usually earn higher salaries than non-graduates. Alternatively, you might borrow to finance your own business, then hopefully your business will grow and deliver considerable wealth.
- Make sure you can afford to repay any debts you take on within a reasonable time frame – anything you can’t afford is definitely not ‘good debt’.
- Consider which is the cheapest and best way of borrowing.