Understanding Good Debt and Bad Debt

1. https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

2. Taking a loan is common these days, it not only helps you in emergencies but also helps to eliminate your temporary cash crunches. But before you borrow, it’s very important to know a few things, of which knowing your exact requirement and analyzing your self for the repayments are the most important ones.  Some themes situations become unskippable and availing a loan is the only solution. But to avoid turning your debt into bad debt, there are few things which you should know. Being unaware of these things can lead to a big financial mess. So, let’s discuss those ones.  https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

3. Knowing the Difference Between Good Debt & Bad Debt https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

4. Good debt - is also loans but it is mostly a sensible investment for your future or the one which makes your financial status stronger in long term. A good debt never has a negative impact on one’s overall financial position. In general, good debts are the ones for which we have a genuine reason to avail of.  For example, taking a loan to purchase a home or a car be considered good debt. One of the reasons to call it a good debt is- after the full repayment of the loan amount you will get the ownership of that particular house or car. So, it is worth going.  https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

5. Bad Debts- are the one which is not worth its value and mostly drains your money. Bad debts can also be defined on the basis of ‘the loans that have no real prospect to go for. The interest rates are also high which results in high EMIs. https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

6. Why it is important to avoid Bad Debt? • The interest rate for unsecured personal loan and credit cards are unconditionally high. Hence, it is important to prevent these loans from turning into bad debt. To avoid such condition one should think and analyze a few things before applying for the loan: • Is the availing of loan really important? Are there no other options? • Compare the interest rate for the loan which you are looking for with all the lenders. • Analyze your repayment capacity before you apply for any loan amount. https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

7. Understand and Analyse the loan before you go for it! Not all loans are bad debt, as said above some debts are worth going for as in the end, you get the value in return for which you paid.  If the loan which you are planning to avail, cannot be justified in terms of requirement, purpose, interest, and repayments, such loans are always a bad loan. A very good example of bad debt would be to take a loan of 4-year tenure for buying a flagship smartphone that would become outdated within 2-3 years of its launch. Nothing about this loan is justified, except that it is a wastage of money. https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

8. What to do if You are already Trapped in Bad Debt • Go for Refinance or a Debt Consolidation Loan • Talk to Your Lender • Ask Your Lender for Settlement https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/

9. Thank You! https://financebuddha.com/blog/understanding-good-debt-and-bad-debt/