Get More, Less Or Cheaper Credit?

Debt is like central Baghdad populated by fluffy, be-ribboned animals. Should we allow this terrible thing? And what can you do about your debts?

I find debt to be more disturbing than central Baghdad after dark. No it's worse than that; it's like a world full of fluffy animals in pink ribbons and cute waistcoats. It's insidious.One Foolish reader apparently agrees. He wrote to me saying that forty years ago his bank manager would never have let people run up the kinds of debts that we can now get with ease. He implied that credit cards, and presumably all other forms of loan, shouldn't be promoted at all, because the debt still has to be repaid regardless of the interest rate.In my ideal world, no one would be allowed to get credit over a specified percentage of their earnings without passing tests to show that they fully understand the risks. They'd also have to show that they were psychologically stable, by which I mean they're not going to run up hideous gambling debts or shopping bills and turn shotguns on their compulsive selves. Furthermore, lenders shouldn't be able to offer obscene interest rates.However, in Hernando de Soto's The Mystery of Capital he argues that to become a prosperous nation you need access to credit, and lots of it. I feel it's one of the weaker arguments in an otherwise excellent book, because it's perhaps not backed up by enough empirical evidence. Nevertheless, it does neatly explain why the ability to get credit is important. On the other hand, he's talking about secured credit (e.g. a mortgage) which usually offers the cheapest interest rates.So yes it's a fascinating debate, but the ethical issue raised by the reader is more important. It's far better not to get debts in the first place, especially non-mortgage debt. As one writer said in a Fool article recently: 'I don't do debt.'If you don't think debts are all that bad, to see just what it can do to you look at this thread from our Dealing with Debt discussion board (although you should stop reading when you get the gist, it's rather long). This board has helped many Fools get out of trouble.If you already have debts, you should try to reduce them as quickly and cheaply as possible. You should cut down on luxuries to pay off debts more quickly and borrow more cheaply. You can do the latter by using interest-free credit cards, as explained in this article, or you could look around for a cheaper personal loan, as today's rates are the lowest we've ever seen.Make the world a less disturbing place: learn more on getting out of debt, get a cheaper loan or even a 0% credit card.