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Bad Debt and Good Debt! What is all about?

Debt is considered by almost every individual, who is earning money and cannot fulfill all his or her desires with it. With the use of debt, you can achieve the tasks. Being a borrower, you should know that there are two kinds of debt, good debt and bad debt. Understanding the difference between two is easy with the help of some areas where you spend your money.




Let’s talk about the good debt first.

Good debt:

A good debt helps you in generating income and wealth for you. The best example to depict the importance of good debt is an old adage, “it takes money to make money”. Three things which are worth full to take loan for:-

  1. Higher Education:

It is good to complete higher education first and then take all the responsibilities by doing full time work. What if you lack the funds due to the poor financial conditions? Do not leave your study at the current stage if you are really passionate for learning something of your interest. Get the loans from the online lenders, who are presenting education loans to the students. Do part-time job with studies to pay back on time.

  1. Acquiring own home:

In a self-owned home, the level of comfort is high. You need not to be worried about the rent and you can renovate anytime when you need. Limited funds restrain from buying your own house, so now get your dream fulfilled by availing the home loans, provided by the direct lenders.

  1. Start-ups:

Not every person wants to do a job. Some people have business skills, which can be utilised by them in commencing their own venture, and make the processes into long run process. A start-up need an adequate capital and if you do not have that and the stakeholders are not considering your business idea, then consult with an online lender and avail the benefits, which can enable you to get your idea implemented successfully.

The good debt can only be risk if you are not learning properly in your higher education and then fail to get a job on time. Another thing is if your business idea is not good then you can also waste your sum of money. Make sure you are utilising the value properly so that good cannot become a downside for you.

Bad debt:

A bad debt is something, which does not help you in generating a fixed income. These debts are used for satisfying personal choices. It is not actually bad as there is no loss but it is called so because it does not bring any gains. With these two examples, you can understand the concept of bad loans.

  1. Purchase of Car:

Until and unless you want to come into a business of giving your cars on rent or driving it to earn the money, it is a bad debt according to the concept of gain and loss to take a loan for car.

  1. Expensive clothes and home appliances:

Purchasing expensive clothes for you and taking loans for it is a kid of the bad debt as the clothes won’t give any returns except giving you memories. Home appliances are useful for you as they provide comfort but you can even adjust without these. Taking loans for the home appliances is also a bad debt.

There are some disadvantages of good debt too than bad debt. There is always a mid-part among these two, which can also be known, as grey line, which is neither good nor bad, but a neutral option. The best example of that are debt consolidation loans. The people, who have number of debts, use these and their credit profiles are running by the low credit scores. Consider these loans by purchasing a loan and repay other debts. With the help of these loans, a borrower can even reduce the cost of the rate of interest than paying so many debts at once.

The Bottom Line:

You should always be aware for what you are taking loans by analysing the value of it. In this way, you will never get financially ruined. Get debt consolidation loans, if you have various debts at once to come out of the difficult financial situations.


Author Bio

Sara James writes regular blogs and articles, which not only make sense but enough to gather knowledge on the UK finance. In her long writing career, she has won several accolades and it is still continuing.

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