Is debt ever a good idea?
Debt is something that most people will have to deal with at some time or another. For many people, this is a normal part of life and something that doesn’t cause them any difficulty, but getting yourself into debt without a good reason and without a means of paying it back is never a good idea.
If you are going to university, that’s one example of a situation where getting into debt might be a rational decision. It’s a big commitment, as you will end up paying back thousands, but this will also give you the opportunity to earn more than you would have perhaps been able to without a degree-level education.
In order for a student loan to make any financial sense, however, it’s vital that you apply yourself fully whilst at university. Spending all the money on beer and kebabs and ditching lectures in favour of video games and sleep might seem like the obvious choice when you’re 18, but you will regret it eventually.
Getting into debt is also a normal part of buying a house for many people. You shouldn’t expect to be able to turn a quick profit, but buying a house as a long-term investment is a viable option. The important thing is to recognise that a mortgage is absolutely a long-term, substantial financial obligation. A few years down the line, interest rates could go up, or your income could go down – it’s important to consider how you would cope in such circumstances.
Taking out a loan to help get a new business of the ground can also be justifiable reason for getting into debt. If you are applying for a business development loan a reputable bank, they will usually look carefully at your business plan in order to evaluate whether there is a realistic chance of you making the money back. If you don’t have a solid business plan and there isn’t a high probability of your venture being profitable, taking out a loan to fund your project would be foolish.
There may still be steps you can take to ease the burden if you have already overstretched yourself with too much borrowing. Don’t let the situation get out of control – get advice from a specialist and find out what options are available.