Yes, we know that you’ve probably been told all your life that debt is not a good thing. We’d all prefer not to have it, and if you have any, we’re always conscious of having to pay it off.
Well, of course, a lot of these tips are true for certain kinds of debt, but today, we are here to tell you that some debt can actually be good for you.
Yes, you read that right.
However, before we get into that you need to understand the distinction between good debt and bad debt.
So let's start with the battle of good debt vs bad debt and how they affect your daily life.
What is Good Debt?
In the simplest of terms, any debt that allows you to enhance your wealth and maintain your financial stability is called good debt.
Debt helping maintain financial stability? Seems far-fetched, doesn’t it? Well, not really.
We’re sure you’ve heard of the age-old saying, “You need money to make money.” Never in history has this been more relevant than it is today.
Some of the greatest giants in the history of finance have all used debt to grow and sustain their financial health.
Now, of course, you don’t care what financial giants do, you want to know why debt could be useful for you.
Well, more on that later. Let us now take a look at what is bad debt and how to stay away from it.
Bad debt is most commonly the kind of debt that you can’t afford and can be avoided, or the debt you use to buy an asset that decreases in value with time. This kind of debt is often observed in the form of credit card purchases of clothes, shoes and other similar consumables.
In many cases, car loans are also considered to be bad debt because of the fact that they are depreciating assets. However, if the loan is short-term, has very low or no interest and you can afford the monthly payments without a lot of stress, then it can be the right choice.
How Good Debt Can Help You Grow?
Debt can be an excellent way to sustain life and enhance your standard of living. When managed properly, debt can give you liquidity and also help you build wealth over a period of time.
Below mentioned are some good debt examples that can help you with your financial health:
1. Debt Consolidation
If you find yourself owing money to lots of different people - this one’s for you. However, by owing money to so many different places, it’s more than likely you’re overpaying on at least some of them.
To avoid this and to streamline your debt, you can take a debt consolidation loan that helps them pay back all those loans at once and reduce their monthly repayments.
As a part and parcel of life, there are often situations where you may urgently need money to handle emergencies. Whether it’s emergency car repairs, a pet illness or unforeseen care costs, we’ve seen it all.
Unless you have a large amount of savings, taking on debt to handle the emergency is the right choice.
3. A Home Mortgage
This is one that we all either have or are aspiring towards. When it comes to property, there are a number of factors involved. If you are lucky enough to have your own property, it’s more than likely you have, or have had a mortgage.
Getting a mortgage for your house is absolutely crucial. Not only will it give you somewhere you can call yours but it’s also a great investment because the price of properties is almost always increasing. This means that if you ever want to sell, you’re likely to take out more money than you put in.
What’s more, a property can also act as collateral for the future when you are in need of money for an emergency, to start a business or anything else.
Choose Salad Money for Fair and Affordable Loans
Now that we’ve explored the good debt vs bad debt battle, you should feel better about taking on some good debt and enhancing your financial health.