Sepo’s payslip was finally clean. After 5 months of deductions for a loan she took out to buy a laptop, she could not believe she was getting a clean pay-slip. Having worked for 10 years as a civil servant, debt free all this while, time had finally come when she enrolled as a distance […]

Sepo’s payslip was finally clean. After 5 months of deductions for a loan she took out to buy a laptop, she could not believe she was getting a clean pay-slip. Having worked for 10 years as a civil servant, debt free all this while, time had finally come when she enrolled as a distance student and this meant she needed a laptop to join on-line classes and for typing assignments. This left her with no choice but to borrow money to afford a good laptop.

The impact of bad debt on people is psychological, not just financial. Bad debt impairs psychological functioning and decision-making, contributing to poverty trap. For people like Sepo, being in debt triggers anxiety, fear and even shame. The fear of debt can disappear when you know how to manage it strategically. This can only be done if debt becomes a financial tool rather than a burden. Some people fear debt because they want to be in control of their lives. They worry that if they take on debt and fail to pay, they could be trapped in an endless cycle of repayments and borrowings. But a correct loan structure can give more financial flexibility.

For someone who once defaulted on a loan or witnessed someone default on a loan, they may assume all debt is bad.

Instead of avoiding debt completely, the key is to use the right type of debt that supports your financial goals.

Society often teaches us that being debt free equals financial success. But in reality, most successful business owners, property investors, and high net worth individuals use debt strategically.

Good debt can help you grow financially and increase your long-term wealth. Good debt can work for you. It’s about smart borrowing, not avoidance.

Examples of Good Debt:

Business loans – If the loan increases your income or business growth.

Property loans – Mortgage debt helps you build equity and wealth.

Equipment or vehicle finance – If it’s an asset that generates income.

Bad debt is high interest borrowing that doesn’t provide financial returns.

Examples of Bad Debt:

Personal loans for lifestyle expenses – Holidays, shopping, luxury items.

Kaloba – Extremely high charges that range from 50% to 100%.

In overcoming bad debt, one needs to reframe the mindset. Debt doesn’t have to be a trap; it can be a financial tool when used correctly. Instead of avoiding it, learn how to use it strategically by understanding the loan terms.

Before borrowing, ask the following:

What is the interest rate?

Are there any hidden fees?

Can I make extra repayments without penalties?

If you have a bad debt or a high-interest loan such as kaloba, tackle that firstly. Consider debt consolidation to simplify payments and reduce interest. Also, you may negotiate with the lender about halting the interest.

Applying for loans without expert guidance or without having a need for the money can land one into a bad debt trap. We can borrow money with confidence, convinced we will pay it back easily, and then find ourselves trapped in a cycle we never saw coming. This is not a failure of character. What started as a small amount borrowed for immediate needs can slowly grew into a weight that affects everyday living which can be stressful.

The first reason we over borrow is optimism bias. Our brains are wired to believe that our future self will be more capable, more disciplined, and more financially stable than our present self. When we borrow money, we are essentially making a promise on behalf of a future version of ourselves that does not exist yet. George took out a loan, bought a car and started building a 2 bedroomed house. He hoped the car would work as a taxi and help raise money to complete the house. But his taxi business wasn’t doing fine. He struggled to find an honest driver to cash in correctly.

The second reason why we borrow is present bias. Humans are hardwired to value immediate rewards far more than future consequences. Getting something now feels enormously more satisfying than the abstract idea of paying for it later. This is why buy-now-pay-later schemes such as the foreigners who move around with carpets and set of pots are always enticing us to get household items at exorbitant prices. Easy loan apps are so psychologically dangerous; they are designed specifically to exploit this weakness in our brains.

The pain of payment is delayed when it comes to paying later but in the long run the stress eventually catches up.

The third reason is social pressure. In many cultures, borrowing money to maintain appearances is not just common, it is expected. Weddings, cars, clothes, and houses are financed not by wealth but by the fear of judgment. We borrow to look successful before we are successful. The result is a generation drowning in debt, not because of necessity but because of what the neighbours might think. Many young people get into debt to finance weddings or bridal showers, just to feed people for a few hours and remain in debt for many years. Families plan celebrations far beyond their actual means, often without a clear picture of what they can afford, simply because society expects a certain standard. Many find themselves in debt for years, paying for a single day which could have been avoided if they had stuck with what they could afford.

Understanding the psychology behind debt is not about blame. It is about awareness. Once you recognise optimism bias in yourself, you can pause before borrowing and ask am I making this decision based on reality or on who I hope to be? Once you see present bias clearly, you can build systems that make future pain feel real today, like writing down the total repayment amount before signing anything. Awareness does not eliminate the temptation. But it creates a pause. And that pause is where better decisions are made.

Financial freedom does not start with money. It starts with self-awareness. There is a common misunderstanding that people find themselves in debt due to living excessive lifestyles. Anyone can find themselves in debt and this depends on the financial decisions made, because even rich people go bankrupt. Most adults with a debt problem have feelings of anxiety especially if they do not have support from friends or family. Worrying about debt affects one’s sleep and not having a good sleep affects one’s mood and energy levels. It also affects one’s relationship with friends and family as these will avoid you for constantly asking for money. And those with debt do not understand when family members or friends say they do not have money to give out.

Dealing with debt isn’t just a financial challenge as it has significant effects on mental health. We have read or might know of people who have committed suicide due to the pressures of debt. Debt pressure can also lead one into a depression when not handled with care. Relationships are broken either with family or friends as trust is lost when you borrow from friends and fail to pay back.

Breaking free from bad debt is a long journey worth taking. Cut back on non-essentials, for example, downgrade your tv subscription to something cheap or cancel it entirely and ensure the children are in affordable schools. Taking your children to a government school in the years you are battling debt is okay and you explain to them why they have to change schools in ways they can understand. Changing our diet is another way of cutting costs, if it means buying buns from a bakery in a compound, then do it as it is much cheaper. Find stress relieving activities such as brisk walking and exercises that can be done in the comfort of your home if you no-longer can afford gym membership. Avoid joining family or friend’s wedding committees by simply politely informing them that you are in no position to make financial contributions. To my fellow women, there is no need to wear new outfits to every event we are invited to and sometimes, lets learn to turn down some of these invitations if we have to stress about the dress code when we are financially strained. And if you have even a tiny space in our yard, grow some vegetables such as kale (rape), Chinese cabbage or kalembula which is easy to grow to supplement our food. Vegetables can even be grown in sacks if you have limited garden space. If fuel money is a problem, let us put aside our pride and use public transport. Pride is a huge setback to coming out of bad debt because we feel society will laugh at us. If the house you are renting becomes too expensive for you, find a cheaper house in an affordable area.

We are the ones who can help ourselves to come out of a bad debt by sticking to measures that can assist us.

With time and persistence, it’s possible to not have any bad debt. Reach out to family before you call the kaloba person (loan shark). “What is not yours is not yours.” Borrowed money is not yours so we must always pay back relatives and friends who lend us money so that when we reach out for help, they will willingly assist us knowing we always pay back.

Seek help when in need, visit a counsellor near you!