The 6 Most Harmful Myths About Debt — and The Surprising Reality

When it comes to personal finances, few things are as ubiquitous — or misunderstood — as debt. It’s almost impossible to live in the modern economy without taking on some kind of debt. Despite the proliferation of credit cards and loans, however, many Americans still believe myths about debt.

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One thing everyone should know is that debt can be used wisely or unwisely. Without debt, most small businesses would not get off the ground and only a small percentage of Americans would be able to buy a home. At the same time, getting too deep into debt can create financial problems that last a lifetime.

Here’s a look at some of the most harmful myths about debt and how they differ from reality:

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Myth No. 1: You Should Avoid Debt Altogether

This sounds almost comical, considering how many people have debt. But enough folks have repeated this myth that it is considered gospel in certain quarters. The reality is, you’ll find it hard to navigate life without taking on some kind of debt, whether it’s a credit card that lets you reserve a hotel room or a car loan that gives you freedom of movement.

The answer is not avoiding debt — it’s avoiding the wrong kind of debt. One problem some people have is that they don’t understand why they are taking on debt, according to Natalia Brown, Chief Compliance and Consumer Affairs Officer at National Debt Relief , an award-winning provider of debt settlement and relief services.

She says there should always be a defined goal or use strategy in mind, and it’s important not to borrow without a payback strategy. If it’s a business loan, make sure the increased cash flow generates more revenue. That way, debt can become a tool for success.

Myth No. 2: Every Debt Dings Your Credit Score

This is not only wrong, but believing it can actually hurt your score. For one thing, you need to establish a credit history to get a score to begin with. From there, your score can improve when you have credit accounts for a long time, pay your monthly bills on time, and build up a lot of unused, available credit.

Myth No. 3: There is No Good Debt

This might be the most harmful myth of all, because it lumps all debt into the same negative light. In truth, debt can be a positive financial force, but too many people have stigmatized the belief that all debt is bad.

Myth No. 4: Credit Cards Will Destroy Your Wealth

This is another myth based on what happens to some credit card customers without taking into account all of them. There’s no question that building up unmanageable credit card balances is one of the biggest financial mistakes you can make. But if you manage credit cards the way you are supposed to, cards can improve your finances in the form of bonus points and other perks.

This can be a great way to get discounts or cash back on everyday items. The key to maximizing your credit card perks is being smart about how you use the cards. This means paying your balance on time and not spending more than what can be paid off within a reasonable amount of time or in full by the due date.

If you ever do find yourself buried under debt, a company called National Debt Relief is a good resource for returning to financial independence.

Since its founding in 2009, National Debt Relief has helped more than 550,000 people resolve over $11.5 billion in debt.

“We primarily focus on those who have had life changes that rendered them overwhelmed with unsecured debt,” Brown said. “We help our clients by tackling the psychological, behavioral and emotional aspects of their relationship with money and give them access to guidance, tools and resources that will help them build a more secure financial future and be more prepared for the unexpected.”

Myth No. 5: All Debt Should Be Given Equal Priority

The main reasoning behind this myth is that you should pay off all debt as fast as you can. In reality, you should strive to pay off the highest-interest debt first, because you’ll save money over the long haul. Don’t be tempted to double up a payment on a low-interest student loan when you still have high-interest credit cards to pay off. Consider tackling the credit card balances first, before getting ahead on lower-interest debt.

Myth No. 6: You Should Declare Bankruptcy to Get Rid of Debt

The harm in believing this is that your credit could end up permanently damaged. Rather than declare bankruptcy, consult a company like National Debt Relief .

What to Do If Debt is Holding You Back:

If your debt is holding you back, a company like National Debt Relief could help. Here’s how it works: First, tell a Certified Debt Specialist at National Debt Relief a bit about your situation in a free, no-obligation consultation. Then, if you’re eligible and interested in their program, they’ll put together a customized plan that’s right for you and your budget.

With debt settlement, National Debt Relief’s experts will negotiate directly with your lenders on your behalf to agree on a reduced balance, so you could pay less than what you owe and get out of debt much faster.

With debt consolidation, all your debt will be combined into one new loan, ideally with a lower interest rate. This will help you pay off your balance faster and save you money on interest payments in the long run.

National Debt Relief’s experts will help you weigh the pros and cons of all your options. It’s easy to get started here and learn more about all your options.

This article originally appeared on GOBankingRates.com : The 6 Most Harmful Myths About Debt — and The Surprising Reality