Most will definitely agree that debt is not good and that life on credit should not be allowed, but there are people who are still living beyond their means. It is not about long-term loans with low interest payments, but about short-term loans that are taken on a regular basis so that you can afford the kind of life you really cannot afford. Such a choice is very risky and undesirable for a number of important reasons. There will be some evidence here that debt is the worst enemy of every person who makes life worse.
All loans are subject to certain interest rates. Interest rates on short-term loans often exceed 100% per annum. So, if you buy a product on credit, you pay both for the product and for the loan to be able to buy it. That way you spend your money unnecessarily. If you stop living on debt, the money you spend on interest payments could spend on more useful things like saving.
If you live beyond your means, it means that you don’t have the money you need. So you can’t invest money and you don’t get the chance to get passive income. Passive income is the way to ensure a stable financial situation in the long term, because it is obtained independently of the amount of work done. If you have free capital, you can use it, but if you don’t have it, you become a slave to your money.
If you regularly take out the credits and money you get from them, you will not be able to do without your loans. You have to take new loans every month to cover the old ones. As long as nothing changes, such a system works, but if the creditor suddenly plans to increase interest rates or not to lend at all, your entire cash flow is disrupted. You no longer have enough money to repay past debts and cover all current payments. In principle, this means that you are completely dependent on your creditor’s decisions and if they prove unfavorable to you, you will suffer great losses.
Many do not fully understand the seriousness of short-term loans. It is believed that non-repayment of short-term credit can not do anything wrong, as nothing is pledged. For example, a mortgage may be disposed of without the mortgage being surrendered, but short-term loans are issued without such obligations. The fact that nothing is pledged does not mean that you cannot lose anything. If you do not repay your debts for a long time, it will all go to the court process and then you can both dispose of property, property, and frozen and confiscated funds. If this happens, you will have to pay for your mistakes for a long time.
Finally, it is worth mentioning that peace of mind is also very important. Perhaps borrowers will not recognize it, but being in debt is very stressful. As already mentioned, borrowers are entirely financially dependent on creditors’ decisions. If it is not possible to get a loan suddenly or interest payments become higher, the whole financial situation will be destroyed in a snap. Living with the idea that you can stay completely cash-free at any time is frightening, and credits are also associated with other types of risks. There is always a chance that this system will collapse and will have to make great efforts to deal with the amount of existing income and to repay all previously taken loans.
As you can see, life on debt is good only until you can cover your monthly payments and the creditor does not change the terms of the credit, but even the slightest turmoil in your financial situation can have devastating consequences. Whether you are experiencing unexpected spending, changing macroeconomic processes or credit conditions, your good times can come to an end quickly, so you can’t let life on debt. You need to make savings and invest money so that you can be the leader in your finances.