Overview on Good Debt and Bad Debt
It is common for many people to have to go through taking credit and in this talk, you will find out how the good and bad debt that many people go through usually differ. Good debt is one that increases the net worth of an individual and brings in more money to the individual and is more of an investment. A good debt is normally used by individuals to deal with unforeseen changes that may require financial attention or basically to manage finances. One of the debts in this category includes mortgage loans that have low interest and this is more of an investment since the value of the house normally increases and therefore you can sell it to make profit. As much as a mortgage loan falls in the category of good debt it is essential for an individual to be able to make payments comfortably without straining financially. On the other hand, a bad debt is one that is not able to add long term value to an individual and therefore it cannot be categorized as a long term investment. In this article, you will further find out how bad debts are not an investment since they do not bring any value to the individual.
Payday loans fall in the category of debt and this is because they normally come with very high-interest rates and these strains an individual and ties them down into financial debt. Another bad debt includes credit cards and this is because they have very high-interest rates and one only gets to pay minimum payments and therefore it can end up growing over the years without bringing any value to the individual. This is why individuals are normally advised to take necessary debts and try to avoid high-interest rates that might lead to being financially constrained. For you to find out how you can select good debt, read more here.
As you read on you will find out how individuals can be helped to settle for good debts that are able to bring more money and change their lives in a positive way. An individual should make sure that they go for car loans, student loans, and mortgage loans because these are able to bring value to their life and are more like investments. This is why many individuals are advised to do proper calculations in advance before taking up any loans so that they can be in a position to pay them back. In this article, we have been able to find out how a good debt and bad debt are able to affect an individual’s life and why people should avoid high-interest debt.
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