When borrowing money it is usually because we lack the cash to make a large purchase, such as for a car, home or education. However, an important question to ask yourself when borrowing is if the purchase you would like to make is creating good debt or bad debt.
Good debt is considered borrowing for something that will go up in value over time. For example, real estate, a business or for education purposes. Education loans can be considered good debt because it should increase your income.
Bad debt is debt used to fund something that doesn't hold its value. Some examples would be car loans, personal loans for vacations and use of credit cards for consumable products.
Additionally, loans for bad debt are not generally good for your financial well-being because they usually have higher interest rates and are not tax deductible. Good debt loans on the other hand are frequently tax deductible and carry lower interest rates.
Ideally having no bad debt is the best. However, in some cases a certain amount of bad debt may be ok and unavoidable.
Some financial professionals claim that it is acceptable for 10-20% of your annual income to consist of loans for bad debt. But, going over 25% is getting into a danger zone that may be difficult to get out of. Once you get into this high debt range, the amount of interest paid becomes so high that it results in a cycle that cannot be reversed.
So, just remember to take into consideration the type of debt (good or bad) you are incurring prior to getting a loan. This advice can go a long way toward helping you be a financially savvy borrower.
Jill Kane helps you find loans for all of your financial needs at Low Rate Loans
Different types of loans are available for almost every aspect... Read More
Living in a rented apartment since long. Ever thought of... Read More
Car loans for people with bad credit are readily available... Read More
Are their rewards of being your own boss? Yes, in... Read More
Are you paying out too much every month for your... Read More
A commercial business loan is designed for a wide range... Read More
In his 1968 seminal novel, 2001: A Space Odyssey, Arthur... Read More
Outlined here are some of the many benefits of a... Read More
Here is a useful guide to getting a bad credit... Read More
The bad news about attending college is that it costs... Read More
If you thought your home is worth nothing except for... Read More
Should you be in the market for a homeowner loan,... Read More
You want to buy a home but you do not... Read More
Owning a home is the most important dream of any... Read More
Bad credit payday loans may seem like an oxymoron phrase,... Read More
It can seem impossible at times to get bad credit... Read More
Worried about how to apply for a business loan? Although... Read More
What are personal loans? They are unsecured loans that a... Read More
Online car loans enable you to get a good quote... Read More
So you have decided you want a motorcycle and you... Read More
How many times have you been casually going about your... Read More
Student loan debt is a problem that affects many former... Read More
Military members the price for serving your country and defending... Read More
A secured loan is a personal loan which is generally... Read More
Need extra cash till payday? It's easy to apply and... Read More
For those in the market for a loan UK ,... Read More
Albert Einstein called compound interest "the greatest invention of all... Read More
If you're in a crunch for money, either because of... Read More
Have you ever wondered what is credit scoring? Credit scoring... Read More
Personal loans can be divided into two categories: secured personal... Read More
If you're looking for an online loan, you might be... Read More
Here is a useful guide to personal secured loans. A... Read More
Borrowing money has become more and more popular in the... Read More
If you have poor credit or a recent bankruptcy, you... Read More
In a time when everything seems expensive, it might seem... Read More
Cash advances have become quicker to process with online payday... Read More
If you don't know where to turn for bad credit... Read More
On average, homeowner households earn 95% more than renting households... Read More
This is a common question that many consumers have. Many... Read More
The bad news about attending college is that it costs... Read More
When trying to locate bad credit loans, many people find... Read More
A UK Home Improvement Loan Can Give You The Home... Read More
If you're not familiar with the term, a secured loan... Read More
No one can say for certain where the history of... Read More
You are trying to buy a new property and selling... Read More
In recent years obtaining loans online has become a new... Read More
What are the avenues available to businesses with weak credit... Read More
Over recent years, personal loans have become a popular solution... Read More
If you're just beginning to look at online loans, you... Read More
A second mortgage is a loan that is secured by... Read More
Loan Loan |