Debt can be described as money borrowed from someone or one party from another. Debt is usually used by big corporations to make purchases that they could not afford on normal circumstances. The money is being borrowed under a particular condition and must be paid back on or before the agreement date, and it usually carries interest. Commercial paper, Bonds and Loans are example of debt.
Most developing countries borrows from other countries or institution (such as World Bank, IMF etc.) to carry out big projects in their nation. As an individual, it is always advicable not to go into debts you wouldn’t find easy to repay.
Debt is unavoidable 100%, but it is very good to put limitations to them as its de-merits are much larger than its merit.
These are 5 reasons which will always program you to avoid debt.
1. Debt makes you a slave: The language sounds so harsh, but that is how I see it, it is one of the words that make me avoid debt or to get the one I am able to pay back so soon. It is as if they put a dog collar on your neck, the most disadvantage of getting into debt is that you feel subject to your borrower. Especially when you get a loan with higher interest rate.
2. Debts prevent you from having savings: Savings is the power of a nation, the more savings a nation possesses, the more and stronger the economy, this also applies to individual of us, the more savings you have, and the more your financial power. Avoid debt, and if you will need it for a specific reason, go for the ones with lower interest rate, and the one you will be sure you can afford to pay back within a short period of time so as to be able to save. Having heavy burden of debt puts you into slavery, and instead of saving, you will always find a way to settle one debt or the other.
3. Your debt will keep increasing: Heavy debt may make it difficult for you to get money to pay off your monthly bills. Avoid debt, so that your debt won’t continue to grow.
4. You will always be broke: Especially when your debt is great, you will want to attend to it, alongside paying your bills and you will be left with nothing to cater for needs or mostly so much go into rationing.
5. It prevents you from getting a grant next time: The terms in a loan company includes you paying up your previous debt before you get access to get another, avoid debt for you to be able to get a grant when you need it most. A business opportunity may quickly come your way, but since you owe up a debt, you are disqualified to get another. You won’t want to approach another loan and get exposed to more risk.
Loans are good alternatives to settling one financial issue or the other, but it’s not good to get addicted, and the most important tip I always give is that, avoid debt if you won’t have a way to pay up back on time.