Is Debt Really A Bad Thing?

Out of debt, out of danger. Day off your debt, you deserve to have your own money.

There are two types of debt, good and bad. It is important to understand the difference between Good debt and Bad debt.

Let me first start by saying that ideally, the best situation is to have no debt at all. In an ideal world, the perfect amount of debt is no debt. 

I say this because even if there is such a thing as "good debt" the fact remains that you still owe someone money and the Bible is always right and makes sense when it says in Proverbs 22:7 that "the borrower is the servant to the lender."

However, in this day and age, it would seem that we couldn't escape the fact of debt. This is unrealistic for most people who aspire to own a home, automobile, or start a small business. ​

Knowing The Difference Between Good And Bad Debt
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The difference between these two types of debt can be distinguished as follows:

Good Debt
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Good debt is generally defined as that which generates income and increases your net worth. Good debt typically has a lower interest rate, something you believe will grow in value over time, helps increase your credit history, and is within your budget.

• Education
• Property
• Business loans

Bad Debt
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Bad debt is of course the opposite of good debt. This is debt that does not generate any income and does not increase your net worth. Bad debt is typically higher interest debt, not backed by a value increasing asset, unplanned within your budget, and can negatively impact your credit score.
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• Car Loan 
• Credit Cards (if it use incorrectly)
• Store Credit
• Cash Advance

Know What You Are Getting Into
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Earl Wilson once said, "Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's." Those caught in the sinkhole of debt belong to the last category. Make sure you are not one of them!

If you incur good debt, make sure it doesn't become bad debt. If you have a habit of making bad debt, it's time to end such a bad habit. And if you are in an ugly situation now, fear not! It will come to pass.

Don't lose hope.
Problems are called problems
​because they have solutions.

Strategies in paying off debts

• ​List loans based on interest rate
• Prioritize paying loan with highest interest rate

Strategies in paying off debts

Debt Snowball

• List loans based on outstanding balance or amount
• Prioritize paying the loans with smallest amount

Loan Restructuring

Tips to get out of debt

• Stop borrowing and talk to your creditor
• Request a loan restructuring with affordable payments
• Adjust your spending
• Create or look for other income streams

Keep in mind that lenders are not permitted to do the following, even if you have excessive debt, in accordance with BSP Regulations on Financial Consumer Protection:
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• Threaten to inflict violence or harm
• Use obscenities, insults or profane language
• Threaten to communicate false credit information
• Threaten to take action that cannot be legally enforced
• Disclose to third parties names of borrowers who refuse to pay debts
• Make false representations to collect a debt or to obtain information
• Making contact at unreasonable times (before 6:00 a.m. or after 10:00 p.m.)

Can debt be a cause for your imprisonment?

No individual shall be imprisoned for debt or non-payment of a poll tax, states Section 20 of the Republic of the Philippines Constitution of 1987. However, if they are proved guilty of fraud, debtors may be sentenced to prison. For instance, it may be a criminal act occurring under estafa if you were misled into thinking the debtor could pay because he had numerous assets while, in reality, he has no intention of paying you.

Is death the end of debt?

​In Article 774 of the Philippine Civil Code, it is made clear who is responsible for paying off debts and other financial responsibilities left by the deceased: the successor.

Succession is a mode of acquisition by virtue of which the property,
rights and obligations to the extent of the value of the inheritance,
​of a person are transmitted through his death to another or others either by his will or by operation of law.

Article 776 of the same code also states that "the inheritance includes all the property, rights and obligations of a person which are not extinguished by his death." In light of this, it's crucial for the surviving family to be aware of the deceased's liabilities, such as any outstanding loans, credit card debts, amortizations, or other debts that need to be paid off.

Remember:
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• Borrow for productive activities
• Borrow only what you can afford to pay
• Pay on time, in full