5 Important Reasons to Pay Off Debt Before a Collapse

pay off debt before a collapse


If you ever do research about preparing for an economic collapse then you are going to find tons of results. Most of them proclaim that the collapse is imminent. Some even proclaim that we are only a few days away from a collapse. However, not many will talk about the importance of how to pay off debt before a collapse.

Those websites that proclaim the collapse is only days away always seem to change their tune a few days later. Now I’m not saying that a collapse isn’t possible or imminent. You can get a good indication of the future by looking in the past.  There has never been one fiat economy that has ever survived.

While it is important to prepare for such a threat, we can’t get caught up in the fear mongering. In this post, we are going to talk about why it is important to pay off debt before a collapse. Many are under the impression that debt will disappear after a collapse. So they max out their credit cards justifying their actions by calling it prepping.

There are others that believe they will be able to max out their cards before the collapse and not experience any repercussions.  Surprisingly, you will still have to pay that debt during a collapse. You can research about how people still had to pay their debts in past collapses like in Argentina, Greece, and Rome.  So we are going to be discussing why it is important to pay off debt before a collapse.

5 Important Reasons to Pay off Debt before a Collapse

  1. Unemployment will skyrocket

During the economic crisis of 2001 and 2008, the United States alone witnessed unemployment rise to historical highs.  2008 was the worst year for jobs since 1945. There was a total of 2.6 million job losses (CNN).

Not only that, but people were unemployed for longer than ever before.  Many people including myself were unemployed for 2 to 3 years.  This included jobs of all types such as white-collar positions.  People with formal education and training were not exempt.  I knew of people that had Master’s degrees that were unemployed.

This was only an economic crisis.  It still wasn’t as bad as The Great Depression.  Therefore, you can expect even more job losses with a full-scale collapse.

During this time of unemployment, you will be making a small amount of money.  That is if you even qualify for unemployment.  You won’t be able to pay your debts.  The money that you receive will need to be spent on the essentials such as rent/mortgage, food, utilities, etc.

Unemployment causes millions of Americans to default on loans.  During the recession of 2008, we also witnessed a historical high of bankruptcies and people losing their houses.  So it is best to have those loans paid off ASAP in the case of an economic collapse.  Yes, the value of your house may plummet but at least you won’t have a mortgage payment to stress out about.

  1. Interest rates will skyrocket

In the recession of 2008, the banks cut interest rates in efforts to combat the crisis.  In a collapse, they won’t have the ability to do that.  With the collapse of the dollar comes hyperinflation which produces higher interest rates.

Most credit cards and loans have variable APR%.  That means it fluctuates with the economy.  It can increase or decrease at any time.  A collapse would cause an exponential increase in interest rates.  So something that you bought on credit for a $100 could end up costing $500 after interest.

Then on top of that, you will be challenged with finding a way to pay off the debt with something of value. The dollar would lose its fiat value.  It will be worthless.  Many stores will even stop accepting the dollar or charge a higher price because of the lack of value.

This can be offset by investing in something tangible that has real value.  One great investment includes silver.  This is one of the many reasons why preppers should buy silver.  The price of silver stays consistent with inflation.  Stores will most likely return to accepting junk and minted silver.

  1. Companies will become more aggressive in collecting their debt

As I mentioned earlier, during the recession of 2008 we witnessed millions of people filing for bankruptcy.  Many defaulted on their mortgages and became homeless.  Argentina witnessed this first-hand during their collapse.  A record amount of people were becoming homeless because houses were being repossessed.

So companies will be desperate to recoup their money to protect them from going under.  One way to get money back is by taking houses that hold some value.  Now, you may be able to work a deal with companies who will allow you to pay what you can.  But the chance of that happening is slim.

  1. Accounts will be frozen

If you are unable to pay your debts then your accounts will be frozen. This also happened to the people of Argentina during their collapse.  That means whatever money that you have coming in will automatically be taken.  You won’t be able to use your cards at the store anymore.  You won’t be able to stop it from happening either because most employers deposit paychecks directly into bank accounts.  Most don’t have the option to be paid by check anymore.

There are a few ways to combat this threat.  If you are paid under the table then you may be safe.  Another great option is to have some cash or assets on hand and not in your bank.  This is another great reason why preppers should buy silver.  You can store it in your home and can be quickly liquidated.

This is why I try to purchase at least $20 of silver bullion a week from SD Bullion.  It isn’t a lot off top but over time it really adds.  I don’t really have the ability to go out and buys thousands of dollars of bullion at a time.

  1. You can build up more supplies

Our society teaches us to spend money as soon as we get it.  It is said that the more money that you make then the more that you will spend.  This is because we don’t have a modest mindset.  We like to treat ourselves and have the newest and nicest thing.

You don’t have the money to buy that new $50,000 truck? No worries!  Just put it on credit and take 7 years to pay it off.

It is easy for us to spend credit up front because we don’t feel the effects initially.  This is until all the bills start rolling in.  Then we start to worry about how we are going to make it until the next paycheck.

This shouldn’t be our mindset as a prepper.  Our desire should be to become financially free.  We need to become self-sufficient and not a slave to a lender.

Instead of spending hundreds of dollars every month on interest payments we could be spending that money of buying prepper gear and supplies.  We could be using that to get some self-defense or survival training.  That way when the collapse happens we are fully prepared in the important areas and not just partially prepared in many areas.

This is why I talk about budgeting in The Strategic Prepper eBook.  In order to become bug out proof, we need to be out of debt.  So we need to pay off debt before a collapse now.

Altogether, these would be my reasons on why it is important to pay off debt before a collapse.  If you have questions or suggestions then please leave those in the comment section below.  Your feedback helps the community prepare the smart way now so that we can thrive later.


pay off debt before collapse