HOW TO IDENTIFY GOOD
AND BAD DEBTS
DEBTS
Whether your debt is good
or bad depends on the type of debt, the reason you owe it, and whether you can
afford to repay it. When used the right way, debt can help you manage your
finances more effectively, leverage your wealth, buy things you need, and handle
emergencies.
GOOD
DEBTS
A good debt should also be
one that the debtor can afford to repay on time and especially the interest
rate is low.
Examples of good debt are
mortgage, emergency medical, property, study or business loans etc
BAD DEBTS
These are often debts
incurred for purchases that are useless, or for depreciating assets that will
not produce an income. Advance payment can be dangerous as well.
Example of buying an
60-inch TV Set or Unused Sports cars etc.
TIPS: –
A
credit card debt is not bad debts if you able to pay all off during receiving
the statement.
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