Avoiding Unhealthy Debt to Maintain Financial Health

In this modern era, easy access to loan facilities has made society more vulnerable to uncontrolled debt. Without proper planning, debt can become a financial burden that disrupts personal financial stability. Below are the types of debt that should be avoided to keep finances healthy.

1. Consumer Debt: Fulfilling Wants, Not Needs
   Consumer debt refers to loans taken out to purchase goods or services that do not provide any added value or future income. Examples include buying the latest gadgets, luxurious vacations, or fashion items using credit cards or paylater services. This type of debt usually carries high interest rates and poses a risk of depleting assets without long-term benefits.
    

2. Illegal Online Loans: High Risks with Severe Consequences
   Illegal online loans offer quick fund disbursement but are often accompanied by extremely high interest rates and unethical debt collection practices. Some cases have shown abuse of borrowers' personal data, even involving intimidation. It is advisable to avoid illegal online loans and instead choose financial institutions that are registered and supervised by the Financial Services Authority (OJK).
    

3. Uncontrolled Credit Card Use
   Credit cards provide ease in transactions, but if not managed wisely, they can lead to accumulating debt. Low minimum payments and high interest rates can make repayment difficult. It is recommended to use credit cards only for essential needs and ensure that the balance is fully paid off each month.
    

4. Installments for Consumer Goods: Buying Unnecessary Items
   Purchasing consumer goods such as electronics or vehicles on installments can burden finances if not well planned. The value of these goods often depreciates, while installments and interest still need to be paid. It is better to save up first before purchasing these items.
    

5. Debt to Cover Other Debt: A Temporary but Dangerous Solution
   Taking out new debt to pay off old debt, also known as "robbing Peter to pay Paul," is not a long-term solution. This practice can worsen financial conditions due to the interest and additional costs associated with the new debt. It is better to focus on better financial management and seek additional sources of income to pay off existing debt.

Strategies to Avoid Unhealthy Debt

To prevent falling into harmful debt traps, here are some strategies that can be applied:

• Create a Clear Budget: Set spending priorities and allocate funds according to needs.

• Avoid Impulse Purchases: Reconsider before buying non-essential items.

• Use Emergency Funds: Prepare emergency funds for unexpected needs so that you are not forced to borrow.

• Increase Financial Literacy: Learn about personal financial management to make wise financial decisions.

• Seek Additional Sources of Income: Increasing income can help reduce dependence on debt.