The Ultimate Showdown: Good versus Bad Debt

The Ultimate Showdown: Good versus Bad Debt

- in Debt Management
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Debt. It’s one of those words that no one likes to here. Many people are keen on getting out of debt. They don’t want to spend their lives indebted to credit companies. But, there are some positive attributes of debt. Not all debt is bad. The key is to decide what good debt is and what is bad debt. In the main, this can be split fairly evenly. Making sense of money and what debt can do for you is one of the most financially savvy things that you can do. After all, loans can come in all shapes and sizes. But, ensuring that you are on the right road to good financial health is a must.

So, what constitutes a good or bad debt? Let’s get to the showdown.


Making Sense of Bad Debt

Bad debts, in short, are the debts that people take out to supplement a lifestyle that they simply cannot afford. If you are living off loans to pay for petrol and bills, you need to ensure that you are making a budget and making some serious cutbacks in your home. Bad debts often involve high interest credit cards and loans for brand new cars. Never buy a brand new car via a loan. The depreciation will sting you! But, what makes for a ‘bad debt’ is the way in which you view your finances. If you are spending beyond your means and you are trapped in the cycle of debt, you need to take the right steps to make sure that you are not in this cycle forever. Seeking out credit counseling can be a great start. That way, you can make sense of your debt habits.

What is Good Debt?

Good debts can be things like an American web loan to help you with essential purchases, such as household goods or used cars. But, good debts come in all shapes and sizes too. Investment in property or business is often viewed as a good debt. Taking out loans to cover college and university fees can be viewed as a positive attribute of debt. When it comes to loans, it’s all about taking out money that is an investment in your future or your home. As long as you are loaning small and manageable amounts that are directly beneficial to your future, debt can be a very positive thing indeed.

The 101 on Debt

Debt can be a good or a bad thing. You need to make the right decisions based on your household, your income and your outgoings. Thinking carefully and strategically about debt is one of the most adult decisions that you can make. After all, not all debt is bad. But, if you are spending excessively and living off pieces of plastic, well, we’ve already said, that’s not a great way to live. You need to ensure that you are making the most of your finances.

That may mean cutting back on luxuries. But, it may mean taking out small debts so that you can achieve a higher credit rating. It’s all about viewing debt for what it is and living within your means.