💳 The Psychology of Debt: Escaping the Utang Cycle

The psychology of debt, the utang cycle, and how to break free without demonizing credit.

Author

Marianne Lim
September 29, 2025

Why We Borrow Even When We Know Better

Debt is tricky. We all know we should be careful, but borrowing is so normal it almost feels built into everyday life. Sometimes we borrow because we have to (petsa de peligro, emergencies), and sometimes it feels less like a choice and more like the only way out.

And in the Philippines, utang is both financial and cultural.  Utang na loob shapes how we think about obligation, and that mentality can bleed into how we use credit or even extend credit to others.

In today’s edition, we’ll go over:

  • The Psychology behind Debt

  • The Utang Cycle

  • Credit as a Tool

  • What Should I Do First: Pay Debt or Invest?

  • Rethinking debt in our lives

TLDR;

The Bottom Line

  • Debt isn’t just about numbers. It’s emotional, cultural, and a lot of times even survival-driven.

  • The utang cycle keeps many of us stuck, and the system is designed to make borrowing feel easier than breaking free.

  • Credit isn’t evil. It can build your future if used with intention, but it becomes a trap when it controls you.

  • Escaping the cycle takes clarity, strategy, and respect for credit as a tool, not something to abuse.

The content

The Psychology Behind It

  • Instant gratification. A gadget today feels better than savings tomorrow.

  • Social pressure. We borrow to keep up. Trips, upgrades, the like.

  • Mental accounting. PHP 500/month feels small, until you’re juggling ten of them.

  • Shame. Instead of facing debt, we hide from it, while interest piles up.

The Utang Cycle

Here’s how it usually goes:
Borrow → Spend → Struggle to pay → Pay the minimum → Interest piles up → Borrow again.

The system is built to keep you in it.

Credit Isn’t Evil, But It Can Be Dangerous

It’s tempting to paint credit as the enemy, but that’s not the whole picture. Credit is just a tool. In the right context, it can build your future: financing an education, starting a small business, or bridging cash flow when income is irregular. Used carelessly, though, it becomes a chain, keeping you stuck in survival mode.

The difference is intention.

Why should you care?

How to Break the Cycle

  • Face the numbers. List every debt, rate, and due date. Avoidance only fuels anxiety.

  • Pick a strategy. Snowball (smallest debt first) or avalanche (highest interest first).

  • Stop new leaks. Delete saved cards on shopping apps. Draw boundaries on card use.

  • Automate payments. Treat it like rent. Non-negotiable.

  • Redirect freed-up cash. When a debt is cleared, use that payment to build savings or invest. (Read up on how to build your emergency funds here).

🤔 What Should I Do First: Pay Debt or Invest?

A simple rule: check the numbers. Most credit cards charge around 20-30+% interest, while typical investments earn about 8%. If you invest instead of paying down debt, you’re still losing 12+% annually. That’s why it usually makes sense to clear high-interest debt first.

But if your debt is lower cost (say, a Pag-IBIG loan at 6–7%), you can consider splitting: keep paying it down while starting small with investments to build the habit.

Key takeaway: expensive debt first, investing second. But balance is possible when the math works in your favor.

Rethinking Debt in Our Lives

If there’s one thing I want you to take away, it’s that debt is as much psychological as it is financial. Escaping the debt cycle isn’t about hating credit cards or pretending we’ll never borrow again. It’s about reframing credit as a resource that must be respected. 

Because every amount you borrow today is a promise you’ll have to keep tomorrow. And promises, if stacked carelessly, can weigh heavier than you realize.

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