Telling a Good Debt from a Bad Debt
People like to splurge. When there is something nice that we see in department stores or windows, the urge to get it is almost irresistible. This situation is okay if we have the cash to stash. However, the problem arises when we there is no spare budget and we insist on buying. And especially with the presence and convenience of a credit card, swiping the “plastic money” tends to be easy and fulfilling. Thus, people incur debts.
Some say that debts are all the same—that these are loans we get for purchasing items and these need to be paid off. But the fact is that there are two kinds of debts, the bad and good debts.
How do these two differ?
The Good Debt
Yes, there is a thing called good debt. Though people will argue that no debt is ever good, debts are good when the value of the thing purchased does not diminish. For example, when one buys a house and lot or takes a mortgage loan. This is because no house and lot will ever lose its value through time. And when the time comes that the owner wants to sell it, the value either remains or increases. Thus, this is a good debt.
The Bad Debt
Home equity loans can be considered as both good and bad debt. When the home equity is used to make improvements in the house, then it may very well be considered a good debt. However, if this is being used for purposes aside from improving one’s home, it becomes a bad debt. This is because a bad debt is something that is not used for something urgent or useful.
To cite an example of a home equity that is a good debt is when it is used to refinance a mortgage. Compared to conventional home loans, a home equity loans cost is generally cheaper.
School loans are another bad debt unless one finishes school and lands a good paying job. However, if along the way there are changes in plans, then it surely becomes a bad debt. If, for example, the debtor is not able to graduate and does not find a good job, then he will most probably be paying for the loan plus earn for his day to day needs.
The next kind of loan may be an important thing to life. An auto loan, however, is a bad debt because the car’s value will surely depreciate. In about 5 years, the car’s value will be at most half its original price.
Going to finance companies is also another way of getting buried in bad debts. If banks and other lenders will not give one a loan, the best thing to do is either to avoid borrowing or to go to Cash Advance.
Cash Advance is the solution to emergency need for cash
Cash Advance, the top online money lending company in Australia, is the solution to any emergency need for money. If banks refuse to give loans, then it is the perfect place to go to. Though they still conduct credit checks and a default has been discovered, a high percentage of approval is still possible. And since it is online, it can be accessed through the internet with just a few clicks away.