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Bad debt and breaking the 'shame' cycle

By Sasha Karen 19 March 2019 | 1 minute read

Bad debt is never good news for loan applicant, but in 2019 when financing is harder to secure, there are some strategies that investors with black marks in their track record should consider. 

Credit card

Ayda Shabanz, an independent property and finance investment expert and commentator, said that Gen Ys and Millennials are falling victim to bad debt, which stems from multiple credit cards with high interest rates and services such as AfterPay.

“So, what we have are credit cards with high interest rates, a lot of ‘stuff’ we don’t need and can’t afford, and a job that pays well but has no hope of helping us to swim,” Ms Shabanz said previously.

“And when we are sinking, we are too ashamed to even ask for help, let alone consider investing in property.”

Therefore, to avoid the sinking, Ms Shabanz provided her tips for young potential investors to break the cycle.


Avoid impulse buying

If you go out, Ms Shabanz recommended to not go shopping just for the sake of shopping to buy things that you do not need, only because they are on sale.

“Personally, I always have a list of items I feel I need, this goes for home, clothes, [and] work,” she said.

“That way I only buy items I need and go without the things I don’t really need.”

Don’t use buy now, pay later services

Instead of using AfterPay, ZipPay or other services that allow you to buy a product now and break up the payment over a set period, Ms Shabanz instead suggested to simply save for things that you want to buy.

“The trouble with AfterPay and ZipPay is that it’s easy to obtain and you end up having multiple accounts,” she said.

“This makes it difficult to keep track with your spending – leaving you spending more money.”

Reduce your credit card’s limit – or the card entirely

Some banks can approve card holders over the amount they want or request, and those cardholders have a habit of leaving the limit at that high level – which paves the way for temptation to use the card to its limit in the future.

“I suggest you reduce the limit right down or better yet, don’t have a credit card,” Ms Shabanz said.

“You can now use debit cards to buy online, so you don’t have to have a credit card to do that.”

Save by yourself

If you’re looking to get household goods or even a holiday, Ms Shabanz said it is better to save up for it than rely on a personal loan, as it helps avoids trouble in the future and ends up being more rewarding.

Be aware of high interest rates

If a young potential investor does need a credit card or a personal loan, Ms Shabanz warned them to be wary of high interest rates.

“Review the interest rate and don’t sign until you have done some research into the competitors,” she said

“Rolling credit cards for interest free periods is usually another way people get left with more debt. Because they don’t close off the old card when paid off, they end up using it again in difficult times.

“Make sure you rip up old cards and close the accounts by calling the bank for closure.”



Debt refers to the amount of money borrowed from a creditor with the intention to pay back at a specified date.


Debt refers to the amount of money borrowed from a creditor with the intention to pay back at a specified date.

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Bad debt and breaking the 'shame' cycle
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