Hello learners. I am Fenrir. Today we face the mountain. We are talking about debt and the climb to freedom. Whether it is a mortgage a student loan or a credit card debt can feel like a heavy weight in your backpack slowing down every step you take in life. Understands the potential burden of being indebted. It affects your stress levels your relationships and your future ability to buy a home or start a business. Recognises the relationship between current debt levels and financial well being now and in the future. In Europe where the cost of living varies largely between Member States carrying heavy debt can be particularly dangerous if interest rates rise. But do not worry. We have the map to get you out.The climb begins with a strategy for repayment. I am Charon and I will guide you through the mathematics of freedom. You must know how to manage debt repayments effectively. The first rule is about the minimum balance. Understands the relevance of trying to pay more than the minimum balance on flexible credit commitments. If you only pay the minimum on your credit card you are mostly paying interest to the bank. The capital debt stays the same size. To escape you must attack the capital. Considers the overall financial benefit of repaying credit early and takes an informed decision about doing so when funds allow. In the European Union you have a specific right that helps you here. Under the Consumer Credit Directive you have the legal right to repay your loan early at any time. The lender cannot stop you although they may charge a small regulated fee. Exercise this right. Repays the maximum possible taking into account budget constraints on short term credit or rotating commitments. Even small extra payments of twenty or fifty Euros a month can shave years off your debt sentence. Makes timely repayments on all credit commitments unless personal circumstances deteriorate. Being confident to manage credit commitments means being disciplined. However sometimes the terms of the loan are the problem. Aware that it may be possible to renegotiate a credit agreement. You can ask for a lower rate or a payment holiday. Takes steps to stay informed about market changes when repaying credit and considers renegotiating unfavourable or unaffordable arrangements. If the European Central Bank rates drop or market conditions change your rate should ideally reflect that. Do not be afraid to call your bank and ask for a better deal. It is your money.While Charon handles the math I want to talk about the traps lying in wait on your digital screens. I am Leda. Modern marketing is designed to make you fall into debt without noticing. Aware that marketing and simplified lending processes can increase the temptation to access credit without considering the consequences especially when credit is offered online or via mobile devices. It is so easy to click a button on your phone and owe money instantly. Be aware that some vendors offer credit to incentivise buyers to make a purchase or spend more than originally planned and to increase future custom. They want you to buy things you do not need with money you do not have. Aware that credit offers that are initially interest free may incur interest in the future. They hook you with zero percent now but charge you huge fees later if you miss a single payment. Also look out for Buy Now Pay Later options which are exploding across the EU. Aware that options to buy now pay later including basic utilities in many instances typically are a form of credit and may have a cost. Even though some of these products fall outside traditional regulation in some countries they are still debt. Takes steps to avoid over indebtedness that may result from using easy access high cost credit often sold online. Carefully considers the likelihood that interest free credit can be repaid in full before the end of the interest free period and the consequences of not doing so. Confident to decline unwanted credit that is offered with a purchase. Just say no. Also be careful with your bank balance. Understands that the total amount of money available to spend in a bank account may include an agreed overdraft facility. If you see two thousand Euros in your account but five hundred of that is an overdraft you do not actually have two thousand Euros. You have fifteen hundred Euros and a potential debt. Knows that an overdraft is a form of credit that may incur costs and must be repaid. Has the goal of keeping a positive bank balance as part of following a budget. Treat your overdraft as a safety net not extra spending money.Avoiding traps requires vigilance. I want to discuss the structure of your debt. Understands why it is important to manage the ratio of household or individual debt to income. If your debt repayments are eating up more than thirty or forty percent of your net salary you are in the danger zone. Monitors overall credit use. You need to look at the big picture. Makes an informed decision before accessing additional credit to repay current debts. Borrowing from one card to pay another is a dangerous game. Motivated to resolve issues related to credit before debt becomes a burden. Accepts responsibility for debt and debt management. You must also understand the consequences of failure within the EU system. Understands the implications on credit scores or credit registers of failing to pay debts. In many EU countries we do not have a credit score number like in the US but we have “Negative Data” registers. A missed payment leaves a black mark on your file for years making it impossible to get a mortgage later. Understands that debts can accrue from unpaid bills as well as from the use of credit. It is not just loans. Unpaid utility bills or mobile phone contracts count as debt too. Understands that there is usually an additional cost incurred for late payment of bills and credit. Late fees add up fast making the hole deeper. Prioritises bills and credit repayments over discretionary spending. You must pay your rent and energy bills first. In many EU states there are protections against disconnection for vulnerable consumers but the debt remains. Takes steps to avoid falling behind with payments even if circumstances change. Takes early action to avoid or minimise debt problems. Speed is your ally.But what if you fall? I am Aoede and I am here for when things get hard. Sometimes despite our best efforts we face difficulty to repay debt due to job loss or illness. Aware of the implications of not paying a credit installment and aware of the debt recovery process. It can be scary. Letters phone calls and legal threats. But you have rights. Aware of potential grace periods and public support measures to help repay debt. Informs creditors before the due date of a repayment if it is impossible to pay. Do not hide. Call them. Say I cannot pay today but I have a plan. Under EU guidelines banks are often required to exercise forbearance meaning they must try to help you before taking legal action. Knows where to go for help to reduce debt burden when necessary. In many European countries there are independent public debt advice agencies that are free to use. Do not pay for commercial debt repair services often found online as many are scams. Use the government backed services. Applies for over indebtedness procedure when relevant. If the debt is truly impossible there are legal ways to restructure or clear it through personal insolvency or consumer bankruptcy depending on your national laws. Confident to speak to relevant parties to discuss debt management and repayments. There is no shame in asking for help. The shame is in letting the problem destroy you.You are not alone on this mountain. We are climbing with you.Pay more than the minimum. Attack the capital. Use your EU right to repay early.Avoid the easy clicks. Read the fine print on buy now pay later offers.And if you stumble seek public advice immediately. You can reach the summit.See you at the top. Goodbye!
