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Is Personal Debt Always a Bad Thing?

Do Interest-Free Credit, Home Mortgages & Credit Card Debt Help?

Mar 22, 2009 Asa Ghaffar

High APR personal debt can make it difficult to cover household bills. Are interest-free credit, home mortgages, credit card debt and secured loans a help or a hindrence?

Debt problems are the bane of many peoples' lives causing sleepless nights for millions. According to Credit Action, interest payments on debt over the last 12 months alone have amounted to £76.2 billion. However, not all personal debts are bad and some can help a family to build wealth.

Personal Debt, Home Mortgages and Investments

Without personal debt, such as the home mortgage, few people would ever own a house. A home mortgage is the single, biggest personal debt most people will ever accrue. However, official Land Registry figures show that property doubles in value every seven years.

This has led to a growth in buy-to-let mortgages. Whilst many landlords have built fortunes on the back of personal debt, falling property prices have also created financial difficulties. In the event of default, home mortgage or secured personal debt gives a creditor the right to pursue a debtor for up to 12 years.

Interest-Free Credit

Access to interest-free credit gives consumers an opportunity to buy a new car to get to work or pick up essential household goods in seasonal sales. Whilst buying on credit increases personal debt, interest-free credit and access to discounted goods can save money in the long term. The danger is the enticement of interest-free credit leads consumers to buy things that aren't really needed.

Essential Household Bills

Whilst credit card debt and Payday loans are a source of high APR personal debt, they can also help pay home mortgages, rent and food bills. Balancing household bills is less of a problem, but interest payments on personal debt can serve to make finances tighter the next month. Take advantage of interest-free credit on personal overdrafts, if bad credit isn't an issue.

Student Loans and Personal Debt

A survey in August 2008 by Push.co.uk found that the average student debt was £14,161. Without access to student loans, children from working class families wouldn't be able to attend university. It is argued that graduates earn more than those that do not attend university.

Whilst the majority of personal debt is created because consumers have unlimited wants, some debt can be beneficial. Try to avoid unnecessary purchases as it takes a lot longer to earn money than it does to spend it. Those struggling with personal debt problems should consult a qualified debt counsellor.

Those struggling with financial difficulties and personal debt may be interested in finding out whether they have an illegal credit card or unenforceable loan agreement. Individuals that are struggling with serious debt problems may be able to write-off debt with an Individual Voluntary Arrangement.

The copyright of the article Is Personal Debt Always a Bad Thing? in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish Is Personal Debt Always a Bad Thing? in print or online must be granted by the author in writing.