We need to know more about the concept of personal debt. To put it simply, 'debt is spending money that we do not have'. True financial freedom means leading a debt-free life. If you want to obtain goods or services, you need to pay immediately. In this era of rampant consumerism, when you don't have enough cash, you might ask your parents or grandparents for a small amount of money. You probably do not need to repay them. The money becomes a 'gift'. However, if you borrow money from your parents, you will need to repay them one day. Now the fund becomes an unsecured loan, which is not supported by any valuable assets. Although you might not need to pay interest on the loan, you still have the obligation to repay your parents in full and on time. Don't borrow money from people such as your friends. This might give you a negative financial experience. You might even get into trouble since you may not know how to handle the repayment. On the other hand, you should not lend money to your friends even if they ask. In such a situation, always seek the advice of your parents. If it turns out to be more than a financial matter, you might be able to help your friends through your parents. You might have had the painful experience of repaying a loan over a long period, especially if you have purchased something unwisely. Therefore, you probably have learnt that debt is a serious obligation. When you want to obtain a loan, you need to ask yourself a question: 'Is this worth the long-term obligation of repayment?' Loans are generally evaluated by the lender on the basis of the credibility of the borrower. Therefore, the lender will look into the income and expenditure of the borrower to determine their capacity to meet the repayment schedule. If you ignore the trap and decide to head into debt, you should realise that you have to pay compound interest on your loan. The worst case scenario is that your loan is defaulted. Ultimately the last resort is bankruptcy, or else the lender will request a collection agency to assist you in an attempt to settle the loan. Dr Sze is the president of the Society of Registered Financial Planners. If you have a money-related question, send it to firstname.lastname@example.org with Money Matters as the subject.