Introduction
Borrowing money has always been part of human society. From informal lending among family and friends to complex banking systems offering credit cards, loans, and mortgages, debt has played a significant role in shaping lives, businesses, and economies. For young people aged 18–35, understanding debt is crucial. This is the stage where many are pursuing higher education, starting their first jobs, running small businesses, or trying to become financially independent.
Unfortunately, debt can either be a tool that accelerates progress or a trap that leads to years of financial struggle.
This module equips you with the knowledge and tools to borrow responsibly, manage debt effectively, and teach others in schools and communities how to avoid debt traps. By the end, you will not only understand how debt works but also be able to guide others toward financial responsibility.
1. Understanding Borrowing and Debt
What is Borrowing?
Borrowing is when you receive money, goods, or services from someone else (a lender) with the promise to pay back later, often with additional charges known as interest. Borrowing can be formal (from banks, credit unions, or fintech companies) or informal (from family, friends, or moneylenders).
What is Debt?
Debt is the amount of money you owe after borrowing. It is the financial obligation you must settle with the lender within the agreed period. Debt becomes a burden when repayments are not well planned or when borrowing is excessive.
Why Do People Borrow?
- To pay for education (student loans)
- To start or expand a business
- To buy assets (like a car or home)
- To cover emergencies
- To meet day-to-day expenses when income is not enough
2. Good Debt vs. Bad Debt
Not all debt is harmful. Understanding the difference helps you make informed borrowing decisions.
Good Debt
This is debt that has the potential to increase your wealth or improve your life in the long term. Examples include:
- Education loans: Borrowing to pay for studies that increase your earning potential.
- Business loans: Borrowing to start or expand a business that generates income.
- Mortgage: Borrowing to buy a home that can appreciate in value over time.
Good debt is usually linked to assets or investments.
Bad Debt
This is debt taken for things that lose value quickly or don’t generate future income. Examples include:
- Credit card debt for shopping, luxury items, or entertainment.
- Loans for expensive holidays.
- Payday loans with extremely high interest rates.
Bad debt often leaves you financially drained because it creates no future returns.
3. Types of Borrowing Young People Encounter
Formal Borrowing
- Bank loans - for education, business, or personal use.
- Credit cards – allow borrowing instantly but carry high interest rates if balances are not paid on time.
- Microfinance loans – small loans to support small businesses.
- Digital loans (fintech apps) – quick access but often with high interest rates.
Informal Borrowing
- Family and friends – usually without interest, but can strain relationships.
- Moneylenders or loan sharks – easy access but very high interest and risk of harassment.
- Community groups/cooperatives (savings groups, SACCOs) – borrowing against group savings.
4. The Dangers of Debt Traps
A debt trap occurs when a person borrows repeatedly to repay old loans, creating a cycle of endless borrowing. Many young people fall into debt traps because of poor planning, lack of income, or impulsive borrowing.
Signs You Are in a Debt Trap:
- Borrowing from one source to repay another.
- Paying only the interest and never reducing the actual loan.
- Constant anxiety about debt.
- No savings because all income goes into debt repayment.
Real-Life Example:
A young graduate takes a quick loan from a mobile app to buy a phone. Unable to repay on time, penalties accumulate. To cover this, they borrow from another app. Within months, the debt grows bigger than their salary, leading to stress and financial ruin.
Lesson: Borrow only when necessary and with a clear repayment plan.
5. Principles of Responsible Borrowing
- Borrow for needs, not wants. Take loans only when they will improve your life or income.
- Understand the terms. Read the interest rate, repayment schedule, and penalties before borrowing.
- Borrow within your capacity. Never take loans that exceed 30–40% of your monthly income.
- Have a repayment plan. Know exactly how you will repay before you borrow.
- Avoid impulsive borrowing. Don’t let peer pressure or flashy ads push you into debt.
6. Strategies for Debt Management
Managing debt is about staying in control and avoiding unnecessary stress.
Step 1: Know Your Debt Situation
- Write down all your debts: amounts, interest rates, repayment deadlines.
- Identify which debts are urgent and which are long-term.
Step 2: Prioritize Payments
- Pay off high-interest debts first (like credit cards or payday loans).
- Always pay at least the minimum on all debts to avoid penalties.
Step 3: Budget for Debt Repayment
- Dedicate a portion of your income to paying debt before spending on luxuries.
- Use the 50/30/20 rule: 50% needs, 30% wants, 20% savings/debt repayment.
Step 4: Negotiate with Lenders
- If you struggle, talk to your lender. Many banks allow restructuring or reduced interest.
Step 5: Avoid Taking More Debt
- Do not borrow again while trying to repay existing debt unless it reduces your interest burden.
7. Tools and Techniques to Get Out of Debt
Snowball Method:
Pay off the smallest debts first to gain confidence. Once one is cleared, move to the next until all are gone.
Avalanche Method:
Focus on the debt with the highest interest rate first. This saves you more money in the long run.
Debt Consolidation:
Combine multiple debts into one loan with a lower interest rate.
8. The Role of Credit Scores
A credit score is a rating that shows how trustworthy you are in repaying borrowed money.
- Good credit score: Easier access to loans with lower interest.
- Bad credit score: Denied loans or higher borrowing costs.
Young people should build good credit by:
- Paying bills and loans on time.
- Avoiding defaults.
- Keeping debt within manageable limits.
9. Teaching Debt Management in Schools (KAFI Clubs)
As young leaders, you will be role models in teaching students how to avoid debt problems.
Activities:
- Role-play: Act out a scenario of irresponsible borrowing and show consequences.
- Games/simulations: Demonstrate how debt grows when unpaid using math exercises.
- Storytelling: Share real stories of debt traps and success stories.
- Savings challenges: Encourage saving to reduce dependency on borrowing.
10. Case Studies of Young Entrepreneurs and Borrowing
Case 1: Good Debt
Mary, 24, borrowed a small loan to buy tailoring equipment. She repaid on time, expanded her business, and now employs two people.
Case 2: Bad Debt
John, 22, borrowed money from loan apps to party and buy gadgets. Unable to repay, he was blacklisted by a credit bureau, ruining future opportunities.
Lesson: Borrowing can build or destroy your future.
11. Global Perspectives on Borrowing
- Africa: Mobile loans are popular but often high-interest.
- Asia: Many young people borrow to start small businesses via microfinance.
- Europe/North America: Credit cards and student loans dominate youth debt.
- Latin America: Community lending groups and informal borrowing are common.
12. Practical Exercises
- Debt Diary Exercise: Write down current debts, repayment amounts, and timelines.
- Role-Play: Simulate “lender” and “borrower” roles to show debt consequences.
- Repayment Plan Assignment: Create a plan for repaying a $500 loan.
Conclusion
Debt can be a powerful tool or a destructive force. For young people aged 18–35, understanding how to borrow responsibly and manage debt effectively is essential for building a strong financial foundation.
As future financial literacy leaders, you must not only practice these principles but also teach others how to avoid debt traps, use good debt wisely, and achieve financial independence.
Debt management is not just about money, it’s about freedom, peace of mind, and empowerment to pursue your dreams.
Kindly share a summary of what you have learnt in the comment below in this format:
- Full name:
- Country:
- Summary of what you have learnt:
Join KAFI Community
Steve Zimheni
ReplyDeleteFrom Zimbabwe
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Victor Osaba ongala from Kenya I have learnt the disadvantages of debts and how to manage debts.Debts can destroy your Future
ReplyDeleteNadine R Putana
ReplyDeleteZimbabwe
From this module of debt management I have learnt young people aged 18-35 should understand the disadvantages of debts and how to manage debts.Debts can destroy your future or can accelerate progress.l also got to know the principals of responsible borrowing and strategies of debt management
JAMES MANINJALA
ReplyDeleteMALAWI
My summary for Day 6 : Responsibility & Impact
Personal Finance: Debt Management
Debt can be either beneficial or harmful depending on how it is handled. I learned that good debt (such as an educational loan or business investment) can help one grow financially, while bad debt (such as borrowing for luxury or unnecessary spending) leads to financial stress. Effective debt management means borrowing only when necessary, keeping records, understanding interest rates, and creating repayment plans.
Personally, I realized that I have occasionally borrowed money impulsively without considering repayment strategies. Moving forward, I intend to take borrowing more seriously and ensure that any loan I take contributes to my long-term goals, not short-term comfort.
Adewuyi Anuoluwapo Damilola
ReplyDeleteNigeria
The module talks about debt management and how we can avoid bad debt by ensuring we don't borrow for something that can not generate the money back .We should also avoid collecting debt to pay debt or collecting debt with high interest.
Olivia Kamphale
ReplyDeleteMalawi
- Debt is money you borrow and have to pay back, often with interest.
- Good debt can help you in the long run (e.g., education loans), while bad debt can hurt your finances (e.g., credit card debt for luxuries).
- To manage debt, know your debt situation, prioritize payments, budget for debt repayment, and avoid taking more debt.
- Build good credit by paying bills and loans on time and keeping debt manageable.
By understanding debt and managing it well, you can achieve financial stability and freedom.
I'm Janet Musate from Malawi. Borrowing means receiving money, goods, or services with a promise to repay later, often with interest.Debt means the amount owed after borrowing; becomes problematic if poorly managed or excessive. People borrow to pay for education, start or expand businesses, buy assets, cover emergencies, or meet daily expenses. Good debt loans that build wealth or improve life. Bad debt loans for depreciating items or non-essential spending. Types of Borrowing includes Formal and Informal. Debt traps repeated borrowing to repay old loans leads to a cycle of debt, causing stress and financial ruin. Debt management strategies includes Know your debts, Prioritize high-interest payments, Budget for repayment and more. Tools used to get out of debt are Snowball Method, Avalanche Method and Debt Consolidation. Use role-plays, games, storytelling, and savings challenges to educate peers on avoiding debt traps. Borrowing can empower or harm. Responsible borrowing and debt management are vital for financial freedom and success. Young leaders should practice and teach these skills to build strong financial futures.
ReplyDeleteEmmanuel Oche Samuel
ReplyDeleteNIgeria
Debt management is not just about money, its about the freedom, peace of mind and good reputation. Debt is cultural perceived as a unhealthy financial decision, but a proper enforcement of knowledge on debt management could enlighten people on what to borrow, the reason to borrow, having a repayment plan and keeping a good credit score.
Debt if not managed can lead into some serious consequences like loose of peace pf mind and reputation, financial constrain. However, when debt is managed properly, the reverse is the case.
Leaders, entrepreneurs and the general public should favour debt management skill to promote a society that is financial literate and creating a sustainable practice of money management.
Full name: Eldien Elana Matroos
ReplyDeleteCountry: Namibia
Day 6
This Kafi Hub lesson taught me that borrowing money isn't necessarily a terrible thing as long as it's done sensibly and with a clear goal in mind. When utilized for company, education, or assets that appreciate in value, debt may be a development tool. However, it can also be detrimental when used for unneeded spending or when repayment plans are not carefully thought out. I now know the distinction between good and bad debt, the value of borrowing responsibly, and how impulsive or excessive borrowing can result in hazardous debt traps.
I also learned useful techniques for managing and paying off debt, such budgeting sensibly, talking with lenders when I was having trouble, and applying the avalanche and snowball processes. I learned how to keep my credit score high by borrowing just what I could afford and paying my obligations on time. Most significantly, I came to see how crucial it is to spread this information to others, particularly young people in communities and schools, in order to encourage financial responsibility and aid in averting further debt problems.
Ivy Mwanguku
ReplyDeleteMalawi
I learned that banks help people keep their money safe, send and receive money, and get loans for business or personal needs. There are different types of banks like commercial, microfinance, and digital banks. Banking is important because it helps people save, invest, and grow financially. I also learned that young people should understand how banks work so they can use them wisely and help others learn about money.
malama pole
ReplyDeletezambia
from this module i have learned that debt management involves creating a structured plan to pay off debts, often with the help of a credit counseling agency or debt management company. This plan typically consolidates debts into one monthly payment, reduces interest rates and fees, and helps individuals regain control of their finances. By prioritizing debts, budgeting, and negotiating with lenders, individuals can effectively manage debt and achieve financial stability. Debt management requires discipline and commitment, but it can provide a path to financial freedom and improved credit scores over time.
Joseph Phiri
ReplyDeleteZambia
I've learnt that debt can be both a helpful tool and a hindrance, depending on how it's managed. I've gained insights into the differences between good debt, such as borrowing for education or business, and bad debt, like credit card debt for luxury items. I've also understood the importance of responsible borrowing, including understanding loan terms, borrowing within one's capacity, and having a repayment plan. Additionally, I've learnt about debt management strategies like the snowball and avalanche methods, debt consolidation, and the significance of maintaining a good credit score. By applying these concepts, I can make informed decisions about borrowing and manage debt effectively to achieve financial stability and independence. Furthermore, I've learnt the value of teaching others, especially young people, about debt management to empower them with financial literacy and responsibility.
Grace Victoria Nkhoma
ReplyDeleteMalawi
Through this module l have learnt what borrowing is and what debt and why people borrow for instance to pay for education,to buy asserts. A good debt has a potential to increase wealth or improve life in the long term on the other hand bad debt is taken for things that lose value out of debt like snowball method debt consolidation for instance loans for expensive holidays. I have known types of borrowing young people encounter for example formal borrowing such as bank loans,credit cards,digital loans and informal borrowing like money lenders. From this module l also understand principles of responsible borrowing like borrowing for needs not wants, understanding the terms, borrowing within your capacity, strategies for debt management, tools and techniques to get out of debt lastly teaching debt management in schools through role playing,story telling and saving challenges.
Tadala Kandeya
ReplyDeleteFrom Malawi 🇲🇼
In this module, I have learnt that debt management involves understanding borrowing, differentiating between good and bad debt, and practicing responsible borrowing. Good debt, like education or business loans, builds wealth, while bad debt, such as credit card or payday loans, drains finances. Borrow only when necessary, within your capacity, and with a clear repayment plan. Avoid debt traps by planning and not borrowing to repay other loans. Manage debt by knowing what you owe, prioritizing payments, budgeting wisely, and negotiating with lenders. Use methods like the snowball or avalanche approach to clear debts, and maintain a good credit score by repaying loans on time.
Eunice Louis
ReplyDeleteMalawi
Borrowing and debt are essential parts of modern life, but understanding how to use them wisely determines whether they become tools for growth or traps of financial struggle. For young people aged 18–35, responsible borrowing means taking loans only for productive purposes like education, business, or assets and avoiding bad debt that leads to stress and loss. Effective debt management involves knowing what you owe, prioritizing high-interest repayments, budgeting carefully, and communicating with lenders when challenges arise. Techniques like the snowball or avalanche methods and maintaining a good credit score can help build financial stability. As future financial literacy leaders, young people should not only apply these principles but also teach them to others through role plays, exercises, and real life examples, how to borrow responsibly, avoid debt traps, and use credit to achieve lasting financial independence and empowerment.
- Full name: Jabir Tukur Bakiyawa
ReplyDelete- Country: Nigeria
- Summary of what I have learnt:
I have learnt that debt can help build your future if used wisely, but it can also lead to financial stress if mismanaged. I now understand the difference between good and bad debt, how to borrow responsibly, and how to manage repayments. I’ve also learnt practical tools like budgeting, debt tracking, and repayment strategies. As a KAFI leader, I can teach others how to avoid debt traps and use borrowing to improve their lives.
Full name: Christine Caramba-Coker
ReplyDeleteCountry: Sierra Leone
Summary of what you have learnt:
I learnt that debt can either be a tool for growth or a trap leading to financial struggle. Borrowing responsibly means understanding loan terms, borrowing within your capacity, and having a clear repayment plan. I also learnt about the difference between good and bad debt, how to manage debt using methods like the snowball and avalanche strategies, and the importance of building a good credit score. Responsible borrowing promotes financial freedom and stability.
Jofrey Wilfred Bubelwa
ReplyDeleteTanzania
Learn that debt management skills is an essential thing that all of use we need to understand simply because it will enable us to understand why and where should i use the money that I have lend and also how much do I need to pay back as interest to the lender. This will help the person to use that debt for improve his life or bring that person down to financial struggling.
Shalisca T Gomile , Malawi.
ReplyDeleteWe need to develop an understanding on the difference between bad debt and good debt as helps in making informed borrowing decisions. Good debt is the debt that has potential to increase ones wealth or improve life. Bad debt is the type of that debt that does not generate future income. It is important to follow the principles of debt such as borrowing for ones needs and not wants , understand the interest rates , payment agreements and penalities, it's also important to borrow within ones capacity
HAKIZIMANA Theoneste
ReplyDeleteRwanda
I have learnt that borrowing and debt are important tools that can either help build our future or create financial problems. Good debt, like education or business loans, increases wealth, while bad debt, such as loans for luxuries, drains finances. Borrowing can come from banks, microfinance, digital apps, or family and friends, but it must be done responsibly with clear repayment plans.
Managing debt involves tracking what you owe, prioritizing payments, budgeting, and using strategies like the snowball or avalanche methods. Maintaining a good credit score is crucial for future borrowing opportunities. Teaching debt management to others, especially students, helps prevent debt traps and promotes financial responsibility. Overall, debt, when handled wisely, empowers young people to achieve financial independence, stability, and peace of mind.
Chagu Mbilizi Mbogo
ReplyDeleteTanzania
Debt Management, debt can be either beneficial or harmful depending on how it is handled. I learned that good debt (such as an educational loan or business investment) can help one grow financially, while bad debt (such as borrowing for luxury or unnecessary spending) leads to financial stress. Effective debt management means borrowing only when necessary, keeping records, understanding interest rates, and creating repayment plans. furthermore, I intend to take borrowing more seriously and ensure that any loan I take contributes to my long-term goals, not short-term goal.
Kapumbwe Samuel
ReplyDeleteZambia
I've learnt that borrowing and debt can be a steeping stone to success once managed properly, I've also taken into consideration that reading tearm and understanding them is key and avoiding interests that take upto 40% of your generated income can lead to a trap
Tabe Mary ENOW TAKU
ReplyDeleteCameroon
This module emphasizes the importance of understanding debt for young people aged 18–35. It differentiates between good debt, which can enhance wealth (like education loans), and bad debt, which can lead to financial strain (like credit card debt). Key principles include responsible borrowing, prioritizing debt repayment, and maintaining a good credit score. The module also highlights the dangers of debt traps and offers strategies for effective debt management. Ultimately, it prepares young leaders to teach others about financial responsibility and the significance of managing debt wisely.
Benjamin Otema
ReplyDeleteKenya
Debt can be a blessing or a curse depending on the borrower. Mastering debt management is one of the most important aspects of a good financial foundation. There are two types of debts; good debts and bad debts. While good debts help the borrower improve their quality of life, bad debts deprive people of their freedom, causing stress and anxiety.
In order to avoid the anguish of bad debts, one should have a repayment plan before borrowing. They should also make sure that they are borrowing for the right course. Additionally, they should check the interest rates to make sure they can afford taking the loan. It's also recommended to take loans that are between 30-40% of one's income to avoid being overwhelmed by the debt.
Tumanjong Miranda
ReplyDeleteCameroon
Summary
Debt has long shaped lives and economies, and for people aged 18–35 understanding how it works is crucial. Good debt (education, business, mortgage) can build wealth while bad debt (luxury spending, payday loans, high-interest app loans) destroys it. Borrowing comes in formal and informal forms and can lead to debt traps when repayments are ill-planned or when one borrows to repay other loans. Responsible borrowing means borrowing for needs, reading terms, keeping repayments within 30–40% of income, and having a clear repayment plan. Manage debt with budgeting, prioritizing high-interest loans, using snowball or avalanche methods or consolidation, and build a good credit score while teaching these practices to others.
Tinkhe Munthali from Malawi
ReplyDeleteDebt Management is crucial aspect of achieving financial stability which involves understanding and controlling debt to make informed financial decisions like at school as a student.
Also, i have learnt on managing debt effectively, it's essential to know the type of debt, such as loans and credit cards, and understand their interest rates and repayment terms.
By creating a budget and repayment, individuals can take control of their finances and avoid financial stress.
Nyapendi Margret
ReplyDeleteUganda🇺🇬
Debt management is the ability to borrow wisely and repay responsibly. It involves understanding the cost of borrowing, keeping track of loans, avoiding unnecessary debt, and using credit for productive purposes.
Good debt management helps maintain financial stability, build a positive credit history, and reduce stress.
Manage debt; don’t let debt manage you. Borrow smart, spend wisely, and repay on time.
Dineo Mphuti South Africa
ReplyDeleteWhat i have learnt is that there are 2 kinds of debts good and bad and one should be able to diffentiate them. One may be for investment and security and the other may be for buying expensive things which later may not bring anything in return. One should should avoid the bad debt as it may lead to debt traps like borrowing money to pay another debt or only paying the interest and not reducing that actual amount. When a person decides to borrow money they should have a strategy to use on how they will settle that amount before it grows as it may also affect your credit score in a long run.
Name: Wilned Mhango
ReplyDeleteCountry: Malawi
From this module,i have learnt that debt can be both helpful and harmful depending on how it is managed. Good debt, such as education or business loans, helps build wealth, while bad debt for luxuries or quick pleasures can cause financial problems. Responsible borrowing means understanding loan terms, borrowing within your capacity, and having a clear repayment plan. I have also learnt strategies like the snowball and avalanche methods for repaying debt, and the importance of teaching others how to manage debt responsibly to promote financial stability in our communities.
Rejoice Chingagwe
ReplyDeleteMalawi
From today's module, i have learnt about borrowing and debt management. One asks someone about money in hopes of giving them back and that is borrowing and the money that been promised to give them back that is debt.Some of the mine borrowed could you be bad or good. For debt to be bad,for it does not increase future wealth ad for debt to be good,for it increases futility wealth. Before one goes into debt,and they must ask theirselves if they will be able to pay back the money. Then again, one must check their credit score if it is in good shape. Some of the strategies that one can use when going into debt are avalanche and snowball strategies that will aid them in repaying their debt.
Blessmore Mahuka
ReplyDeleteCountry Zimbabwe
In this module we learn the importance of knowing about debt and now to manage it . Debt cab affects anyone and is one of those financial misfortunes that destroy lives . They can either be formal or informal debts. Borrowing and debts are intertwined. Borrowing is when you receive money or goods from someone. Debts are what you owe after borrowing.
People borrow for a lot of reasons, such as paying back debts , paying for school fees or college tuition , to buy assets, to cover emergencies such as car accidents, hospital bills and sometimes to even meet day to day expenses. There is good debt and there is bad debts . Good debt cab be educational loans , borrowing to increase your education and increase your earning potential or borrowing to start a business and hopefully make a profit. Bad debt cab be borrowing to use for things that won't being you any profit .
formal borrowing comes from formal institutions such as banks and informal borrowing is getting money from friends or families or loan sharks . Debts can create and endless cycle of borrowing one therefore needs proper strategies for managing debts
Fatima Abass Kanu from Sierra Leone ChatGPT said:
ReplyDeleteI learnt that debt can either help you grow or hold you back, depending on how you manage it. Good debt, like borrowing for education or business, can improve your future, while bad debt, such as borrowing for luxuries, can lead to financial stress. I also learnt the importance of borrowing responsibly, understanding loan terms, and having a clear repayment plan. Managing debt wisely gives financial freedom and peace of mind.
Harold Handema
ReplyDeleteZambia
Young people can build good credit by paying bills on time, avoiding defaults, and keeping debt manageable. A good credit score leads to loans with lower interest rates, while a bad score results in denied loans or higher costs. Teaching debt management in schools through interactive activities like role-playing, games, and storytelling can empower students to make informed financial decisions. By educating students on responsible borrowing, we can help them avoid debt traps and build a stable financial future. This knowledge is crucial for their financial well-being and future success. It's essential for long-term financial stability.
Name: Esau Kanu
ReplyDeleteCountry: Sierra Leone
I learnt that borrowing and debt are part of everyday life, but managing them wisely is key to financial success. Good debt—such as loans for education, business, or a home—can build wealth, while bad debt for luxuries or impulsive spending can lead to debt traps. Responsible borrowing means understanding loan terms, borrowing within your means, and having a clear repayment plan. Managing debt effectively involves budgeting, prioritizing high-interest payments, and avoiding new loans while repaying old ones. A good credit score opens future opportunities, and teaching others—especially youth—about smart borrowing fosters financial independence, freedom, and long-term stability.
Thank you.
Seshther Banda
ReplyDeleteMalawi
The key takeaways are:
1. Borrowing can be beneficial (good debt) if used wisely, such as investing in education or business.
2. Irresponsible borrowing (bad debt) can lead to financial difficulties and long-term consequences.
3. Understanding debt management is crucial for young people to build a strong financial foundation.
4. Practical exercises like debt diaries, role-playing, and repayment planning can help develop responsible borrowing habits.
By mastering debt management, young people can achieve financial independence, freedom, and peace of mind, empowering them to pursue their dreams.
Chisomo chikanongo Malawi
ReplyDeleteI have learned that not all borrowing is bad , what matters is how and why we borrow. Borrowing can be helpful when it supports productive goals such as education, business investment, or personal growth. However, bad debt often leaves people financially drained because it brings no future returns and leads to stress or financial instability.
I have learned about the different types of borrowing that young people commonly encounter. Formal borrowing includes bank loans, credit cards, microfinance loans, and digital loans. These options provide access to funds but must be managed wisely to avoid high interest rates and long-term debt. Informal borrowing, on the other hand, involves getting money from family and friends, moneylenders, or community savings groups. While some of these options are flexible, others especially moneylenders or loan sharks — can be risky and expensive.
Mboh Honorine
ReplyDeleteCameroon 🇨🇲
Debt is the money owed after borrowing. Borrowing can be from formal ( banks, credit cards, microfinance, digital) or informal ( friends and family, community lend houses) institutions. In order to borrow
-Have a payment plan
- make sure it is for a need and not a want
- check interest rates, payment terms and conditions
Your attitude towards loans could lead to a good or bad credit score which determines your ability to borrow and the interest rates charged. In case of loans;
-Write down all you owe
- Prioritize payments
- Plan and pay (snow ball, avalanche methods)
-Avoid piling loans
John Suab Kallon
ReplyDeleteSierra Leone
I have learned that borrowing means receiving money, goods, or services with a promise to repay later, usually with interest. Debt refers to the total amount owed after borrowing, and it can become problematic if it is poorly managed or excessive. People often borrow to pay for education, start or expand businesses, purchase assets, cover emergencies, or meet daily expenses.
Not all debt is bad. Good debt involves borrowing for productive purposes—such as education or business investment—that can generate future income or improve quality of life. Bad debt, on the other hand, refers to loans used for non-essential spending or depreciating items that do not add long-term value.
There are two main types of borrowing:
Formal borrowing, through banks, microfinance institutions, and credit unions that operate under regulations.
Informal borrowing, which involves family, friends, moneylenders, or community savings groups and often lacks formal agreements.
A major risk associated with borrowing is the debt trap, where individuals repeatedly borrow to repay existing loans, leading to a continuous cycle of debt, financial stress, and possible ruin. To avoid this, effective debt management strategies are essential. These include identifying all debts, prioritizing high-interest payments, budgeting for regular repayment, and avoiding unnecessary borrowing.
Some useful tools for debt repayment include:
The Snowball Method, where you pay off smaller debts first to build momentum.
The Avalanche Method, which focuses on paying debts with the highest interest rates first.
Debt Consolidation, which combines multiple debts into a single payment plan with a lower interest rate.
In financial education, creative approaches such as role-plays, games, storytelling, and savings challenges can be used to teach peers about responsible borrowing and ways to avoid debt traps.
In conclusion, borrowing can either empower or harm, depending on how it is managed. Practicing responsible borrowing, disciplined repayment, and financial planning is essential for achieving financial freedom and long-term success. As young leaders, it is important to apply and share these lessons to help build stronger and financially secure communities.
Fifen Yayee Mefira Cameroon Cohort 5
ReplyDeleteThe module on Financial Management for Entrepreneurs underscored that financial discipline is the true engine of business success, not just high sales. It is the backbone that determines an enterprise's survival and ability to thrive through various stages; from Start-up to Expansion. Every entrepreneur must record all transactions, sales, expenses, loans, and income and Financial Contro
Kodjo Nukunu Emmanuel ADOGLI
ReplyDeleteTogo
Cohort 6
Batch A
Debt management knowledge is crucial for everyone. For young leaders, it helps make wise choices about what to do with debts. Using it wisely makes us grow and be more disciplined in finances. Understanding and Avoiding debt traps is important for us too.
Musuba Bishonga
ReplyDeleteZambia
Cohort 6
Key take aways
1. Borrow to Build, Not to Spend: Only take on debt for things that grow in value or income (like education or a business), not for things that lose value or are just for fun.
2. Have an Exit Plan Before You Enter: Never borrow without a clear, written plan for how you will repay it on time.
3. Pay the Costly Debts First: Focus your payments on the loan with the highest interest rate to save the most money.
4. Your Credit Score is Your Financial ID: Pay all bills and loans on time to keep this score high; a low score makes borrowing harder and more expensive.
5. Stop the Spiral: If you're borrowing new money to pay old debts, stop immediately. This is a debt trap. Renegotiate terms with lenders instead.
6. Teach the "Why": Show others the real-life difference between debt that creates opportunity and debt that creates slavery.