Good Debt vs. Bad Debt. Many of you may say what is good debt and bad debt? Now we start with debt. According to Webster's dictionary is to blame, "something which is entitled, or that one is obligated to pay or perform for one another or to pay a liability or obligation or does something."
Is debt really good, no it does not, however, the term "good debt" is used here for illustration. Good debt is anything you can not afford to pay for in advance, but have the money,pay for a timetable as a mortgage or Home Equity Loan. Bad debt is something you can not afford to pay for in advance, which is usually something you want rather than something you need, or you can not or do not save the money to pay for it, so you for a loan or charge it.
The most common form of bad debt is a credit card. Credit cards should be used with discipline. The best way is to create and maintain good credit to buy something with a credit card and then payout of balance when the bill comes. This shows the credit card company that you pay your debts on time and are a responsible shopper. Other examples of bad debt are cars and personal loans. I know, you say, but I need a car! Yes, many of us need a car to get around but you do not have to buy a new car. The value of a car begins to depreciate as soon as you sign the paperwork. It is better to buy a used car and finance for one or two years or to save money to buy the used carCash.
Examples of good debt is a mortgage and business loans. Some other financial experts can not agree with this, car loans, but I think all you can borrow against, and that has a monetary value is a good debt. The value of a car only reduces it, although the car has a monetary value, this value is lower than the original price paid for the car. An exception to the above, student loans. Student loans are good debt, because the end result is the promotionTheir training, which results in a higher paying job (cash value). The money from this job can be used to pay, your student loans. Some of you may say, I can borrow against my credit card to get an advance, but it's still a bad debt because you do not have the money front and receive a higher interest rate and get charged at the cash advance. Even then, if not increase the value of cash, if in a mutual fund or investment. The best way to determine if you are goodDebts or bad debts is to prepare a declaration of liability. This statement is to determine your income and all your debts, and the difference of the two equal your total liabilities (your total debt).
Bad or no debt, the value decreases over time. Good debt has value and has the ability to increase in value over time. Remember, you can turn at any time, a good debt in a bad debt if you miss a payment or if you are on your circumstances. Your debt-to-income ratio should be between28% and 36%. If you are debt-to-income ratio is above 36%, then you must make a financial health check and see how we reduce spending, cut interest rates, and to pay the amount of monthly payments for your debts.
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