Definitive Guide to a Debt Free Life – Chapter 15: Common Myths Regarding Debt

In the last chapter of The Definitive Guide to a Debt Free Life you learned about the ins and outs of retirement as it relates to debt. We went over saving for retirement, getting out of debt before retirement, and reducing your debt while in retirement.

In today’s chapter, we swing back around and focus again on cold, hard debt. But more specifically, this chapter hones in on the many myths regarding debt.

To put it simply, there are a lot of myths about debt out there. Whether it is just misinformation or a plain old tall tale, these myths can seriously harm those of us that are aiming for a debt free life.

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We use this chapter of our definitive guidebook to look at the most common of these debt myths. The information discussed below will help you sort out the fact from the fiction.

1. You Are Responsible for Your Spouse’s Debt

One of the most common myths regarding debt is that you are responsible for your spouse’s debt once you become married. Many new couples believe that their debt loads merge upon marriage. This is, however, generally not the truth at all.

Couples have the choice to pay down their debt together – and many opt to do this – but you are not required by law to pay off any of your spouse’s debt that was racked up before your marriage.

Like most things, there are exceptions to the rule. Refinancing a loan or adding your spouse to a credit card account can lead to joint liability for these debts. In this case, you both become responsible for paying back these debts even if they were incurred before marriage. (

2. Store Credit Cards Are Great Deals

Thousands of people around the country are wooed by offers for store credit cards from their favorite retailers. Of course, these store cards are not all bad but they are not always as great of deals as offers, pitches, and advertising make them seem.

Much of the advertising for retail store credit cards focuses on interest-free financing, rewards, and other perks. Though these can no doubt be beneficial, what the advertisements most often do not specifically point out is that carrying a balance can effectively cancel these benefits out.

Store credit cards that require you to make monthly payments for a purchase from the retailer often allow you to make the payments interest-free as long as you pay the entire price back in time and in full in a set number of months. If you do not pay off the balance in this time or miss a payment, interest almost always kicks in.

And it kicks in hard. Failing to pay the full price of the purchase can actually bring about back interest – retroactive interest for the entire amount that you paid up front. You will then have to pay this full interest amount – oftentimes very high, over 20 percent – back. (

3. Federal Student Loans Are Not for the Wealthy

We spent chapter 13 of this guidebook discussing student loans. One key point that we mentioned is the effectiveness of federal student loans. If you must take out a loan for your education, these are the ones to investigate first.

But many people feel that they are too wealthy for federal student loans. They end up not applying for them because they believe a well-off family will not qualify. Doing this makes them miss out on a great opportunity to help pay for their college education.

First of all, there is no harm in applying for the loan, even if you do not eventually end up qualifying. Students from well-off families can, in fact, qualify for federal student loans. Many of them do not actually come with any attached income limits.

At the very least, students entering college should explore federal student loans before looking into other options such as private loans because they have much lower interest rates and generally better terms overall. (

4. Monthly Mortgage Payments Do Wonders for Your Credit Score

As logical and intuitive as it sounds, meeting your monthly mortgage payments each and every month will not actually do wonders for your credit score.

Though missing a payment will definitely make your credit score drop, keeping up with your payments will not tack very many extra points on.

The reason for this is that in the FICO typical scoring model, missed payments tell creditors much more about your credit risk than made payments do. (

5. Down Payments on Homes Are Made Easy With Money from Family

Because putting down bigger upfront payments on new homes is becoming increasingly important, more and more people are turning to family members for cash loans to help out.

These types of familial loans or gifts can, however, set off a number of a number of red flags for lenders.

Banks these days are very interested to see where the money for your home down payment is coming from. Lenders want to know where you go the money from, how long you have had it, and how long it has been in your account. Many lenders also require letters from the person who gave the gift to ensure its validity. (

The world of debt and debt relief is complex and confusing. There is a lot of misinformation, myths, and plain old lies about debt out there.

The debt consolidation information above clears up some of the very most common myths regarding debt, setting the facts down in stone, and helping you take yet another step on the path to a debt free life.

Stay tuned for Chapter 16 where we discuss required reading for those in debt.


  •, “10 Debt Consolidation Myths”

  •, “12 Debt Myths That Can Trip Up Consumers”

  •, “The Total Money Makeover: Debt Myths”

  •, “9 Debt Myths Debunked”

  •, “Myths About Debt Consolidation

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