What is debt? The answer to that question is simple: any amount of money that you owe is considered debt. But can it be avoided? The answer to this question is not that simple. It depends on the specific situation of a person or family, and also on the social and economic circumstances at a certain time. While very few people are born millionaires or win the lottery, most people need to buy a home and a car and also pay for education on their own. That means most often that they need some help, and end up going into debt.
So what is debt? Over the course of their lives, people accumulate all sorts of debt that they manage to pay on time, or don’t pay at all. No matter if you stick to your debt repayment schedule or not, as long as you have borrowed money and you have not paid it back in full, you still owe money and you still have debts.
The best example of what is debt can be described by a mortgage loan. In order to buy a house, you need a substantial amount of money, which you borrow from the bank. That is a typical form of debt and a debt that can hardly be avoided, especially when you are young and your family keeps growing. Unless you win the lottery, , you need to get a mortgage in order to pay for your home. The same happens with your car. Although you may call it a lease, it is still a loan, and it still generates debt.
One of the most expensive debts there is today on the financial services market is without a doubt, credit card debt. Credit card debt is a lot more expensive than a home loan or any other type of loan. It is so easy to accumulate credit card debt and get overwhelmed by late charges and outrageously high interest rates.
Unlike the debt generated by big purchases such as homes or cars, credit card debt can be more easily avoided, especially when you start drowning in debt. You will need to focus your efforts on paying off all your credit card debt as soon as possible. High interest debts should always have priority when paying off debt as credit card debt is normally the most expensive debt.. Although it may seem impossible, the truth is that you can manage your finances adequately if you follow a budget and debt management plan.
The first step to getting out of debt is easy. Contact CCSAC today to find out how our counsellors can help you on your journey to financial freedom.