While many people are frightened of taking on debt and how they will finally be able to pay it back, there are situations when debt is good and debt can actually HELP get you out of a tricky situation. There are many many situations in your personal and business life when under funding will cause major problems.

Some areas to consider :-

House Purchase

For the vast majority of the UK population a house purchase will be the largest transaction they will ever be involved in during their lives. While a mortgage of tens if not hundreds of thousands of pounds around your neck can cause problems, it can cause even more problems if you are underfunded for your purchase.

Many people have tried to cut their budgets to lower the need for a large mortgage only to find that they hit trouble in the future.

Your Own Business

This is perhaps one of the main areas of concern with regards to under funding, with more small business people than ever before running scared of taking on debt. While it is not always advisable to take on large amounts of debt for a business, there are many situations where you will need to ensure you are fully funded and able to support the operations of the business.

In the early days when you probably have more money going out than coming in, it is vital that while taking a sensible view of debt, you ensure that you have enough to ensure the smooth running of the business as well as promotional and advertising work.

Personal Finances

This is also an area where people react to debt in a manner which is helpful short term but may have more implications on a long term basis. While the majority of us will have debts of some form, whether this is credit card debt, loans, etc there may come a time when you receive a windfall, bonus from work, etc. Too many people in this situation will rush to payoff all of their debts and reduce their short term liabilities.

While it seems sensible at the time, many people are then left in a situation where in the medium to longer term they are short of funds and need to revisit their bank for a loan. If you are able to keep up with the repayments on the original loan it might be advisable to put your windfall into a savings account where it is earning interest and there for a “rainy day”.

Summary

There are many people who are scared of debt in the UK, and some quite rightly, but if used sensibly it can help to make your life a little smoother. It can help in both your personal and business dealings and while it is never correct to take on debt for no reason, it can be a very useful tool.

Those who fear debt are often the ones who get themselves into long term situations which can result in IVAs and bankruptcy. Respect debt and it can actually help you!