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Is Debt Ever the Answer to Debt?

By: Michael Millington

As of this posting, it has been announced that certain funds look to help Puerto Rico through their moment of crisis with hefty loans for immediate recovery. While this can indeed be a blessing for a country that has seen two back to back hurricanes, it also begs the question of how Puerto Rico is going to pay all of this money back. The country’s debt issues have been well documented in the press, but with the devastation of the hurricane season still fresh and not easily fixed it’s hard to pass up necessary funds.

This scenario happens to regular people as well, just on a lesser scale. Regular people may have larger amounts of credit card, school, or other types of debts with no way out. This might lead some people to try and solve their debt related issues in many other ways. However, is this a wise path to take?

Once you have a certain amount of debt, it would stand to reason that one of the best methods of paying it off is to slowly and steadily make payments over the course of several months. It’s possible that this methodical approach can achieve debt relief eventually, but if you are in dire straits then you might not have that long to wait in order to pay off your debts.

The two scenarios don’t exactly match up. Paying off your debts and helping a country recover are two very different things. While Puerto Rico will still have the majority of their debt even after the loans and the government money that they are set to receive, a typical debt relief program would see a newer loan take the place of the old debt(s). This can result in multiple benefits, like lowered interest rates.

Puerto Rico, as an American territory, can technically file for bankruptcy. If you’ve never heard of this happening before, it would be because this is the first instance of this actually happening. On the other hand, many Americans file for bankruptcy almost every day. The difference between bankruptcy and loans (in reference to debt relief) is that bankruptcy lingers for a while on your credit report. A loan, once paid off, will be over and done with.