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  8 months ago

The Debt Trap

Falling into debt is a very dangerous practice. I have seen many of my friends, relatives, and officemates who have a habit of borrowing money and just never got out of it. Some of them are now in a worse state than before. Friendships and relationships are sometimes destroyed because of their debts. Best friends have become mortal enemies. Marriages are broken and some even become criminals so as to pay their debts.

Banks and many financial institutions are offering financial products such as credit cards, salary loans, car loans, appliance loans, motorcycle loans, home loans, and business loans. I even saw a bank that offered jewelry loans. I also saw an appliance store offering appliance loans even if you don’t have any bank account. There are many lending companies offering loan products. You can even borrow money thru online lending institutions. Credit is easily available now because of Bangko Sentral’s Financial Inclusive programs. The BSP and Banks want the poor and the unbanked have easy access to credit so as to uplift their lives.

Unfortunately, the poor and unbanked not only easy access to credit. They also need financial literacy. A lot of the poor and unbanked have a high probability of not payong their debts because they feel that the lenders are rich and they can afford not getting paid. Many also don’t know how to manage their debts.

Not paying your credit cards on time will mean that you will be charged a high interest rate on your remaining. I have tried it once and it was like 45-60% interests and penalties added to your outstanding balance. I have always advised my family and friends that, if you plan to use your credit card, make sure you will pay the full amount in your next billing. If you can extend your purchase by a 0% installments, do it if you can afford it and make sure you pay on time. If you cannot afford to pay them ontime, don’t buy it. It’s a different thing if it is an emergency like medical or hospital needs. If you are a shopaholic, just cut your credit cards and pay everything in cash.

For loans, make sure you have enough money saved and earned to pay your installments for a long period of time. You should review your financial position annually. Never get a new loan if you are struggling to pay your existing loans. Try to get out of debt rather than be in debt. If you think that you can get away from not paying your bank loans, you are wrong. You will be blacklisted forever and you will have a hard time getting credit in the future.

I hope these advises will help you. Maybe, you have other advises.

CTTO for the picture.


  8 months ago


  8 months ago
From the way i see it, lending money to so called friends serves as a gauge to really know who your real friends are, its just so sad that i had to sacrifice my hard earned money to eliminate fakes.


  8 months ago
Not my practice but I think if no other option is available, taking out a new loan to pay an existing loan is fine as long as the interest rate for the new loan is significantly lower than the existing one. When everything is paid in full, make an effort not to get back in debt. Also, living within your means is good but living below it is way better -- gives you power to save more.


  8 months ago
True, paying debt with another borrowed money and it just go on and on. A never ending cycle if not controlled and done wisely


  8 months ago


  8 months ago
Well the idea is there, but I don't think cutting your credit card to pieces will be the straight forward answer. Because in the end, in order to have your home loans or car loans approved faster with lower rates, you need to have a solid credit history. Hahaha... :D Perhaps what you mean to say, don't buy what you don't afford. That's it. :D


  8 months ago
That's why we need to practice living within our means. Cause if not, we'll suffer from a debt trap.


  8 months ago


  8 months ago
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