Debt. It's something that almost everyone has and everyone is familiar with. For some, it helps them afford things that they couldn't otherwise, but for others, it gets them stuck. For many, debt has become a cycle where interest continues to build and build until it seems impossible for them to get out. And the companies that perpetuate this cycle aren't the friendliest.
When someone can't make payments, instead of helping out their customer, the lending company demands a payment and piles on interest. This has caused many to file for bankruptcy and ruin their credit just to free themselves from the burden of debt. Others try to make minimum payments on their obligations to try to keep their head above water. People stuck in this cycle have an important choice to make, should they pay off their bills or buy food for their family to survive? It's an easy decision, but it has long lasting consequences.
Debt is a trap
The trap is laid early on as a credit customer is conditioned to spend money on things they can't really afford. People who are struggling to get by may irresponsibly finance a new car, even though they can barely afford the extra payments. Even in college, students who do not have credit histories or jobs begin receiving credit card and loan offers worth thousands of dollars. Debt typically traps these students early on because many don't understand the consequences.
The system is set up to normalize debt for everyone. No one thinks twice about the idea of debt because we are so accustomed to it. Entire industries have been built on the concept of debt and getting out of it. Lawyers and credit repair companies profit off of people trapped in debt. At this point, the Debt Industrial Complex should become part of everyday vocabulary.
Are there alternatives to debt?
Debt funding devices, such as loans or credit cards, have minimal alternatives. Some of these products have protections for customers who come across hard times. Many types of student loans include forbearance that temporarily pauses payments for borrowers but interest continues to accumulate. There are also more socially responsible loans, which often come interest free. These loans don't have interest, but have a payment schedule that needs to be followed, even during hard economic times.
Another alternative to these products is income sharing agreements. These products are debt free financing alternatives. In an income share agreement, a person will pledge a percent of their income for a period of time to their funder. This aligns the goals of the funder and the income sharer. When the income sharer is doing well, so is the funder. Income share agreements also have built in protections for their customers. In most cases, the income sharer has to reach a certain income threshold in order to make payments. If the income sharer is below that threshold, then they will not be responsible for any payments. The best part is, there's no interest accumulating during periods of nonpayment. This alternative can be useful to those who want to escape the burden of debt.
Defynance is currently working on an income share agreement for recent college graduates. These graduates will be able to refinance their current student loans to an income share agreement, allowing them to escape student debt. Defynance's goal is to innovate socially responsible financing solutions that eliminates debt from the equation.
