Good Debt vs. Bad Debt What are bad debts? Examples of bad debt are consumable things such as food, clothes, vacations, and other items that do not appreciate in value. When you purchase any of these things and charge them to your credit card, there is always the risk of falling into bad debt. How?
Remember that each time you carry over your credit card balance from month to month, you will also incur high interest rate charges. This is why uncontrolled credit card use can put you in real danger.
Aside from credit card debt, it is also possible to bad debt from delaying or missing mortgage loans, personal loans and insurance bills. If you fail to submit your payments on time, you will be charged with additional costs that can make repayment a burden.
What about good debt? Good debt simply means controlled debt. A very good example of good debt is a mortgage loan. When you a home property, its value will increase as the time passes. However, a mortgage loan can only be good debt if it is properly managed.
Take note that if you miss or delay with your loan payments, your creditor can foreclose your home and you could end up losing your property. Obviously, in order to protect yourself from bad debt, you need to pay close attention to your payments.
Good debt means building good credit history. And why is this important? Having a history of good credit can give you an advantage when applying for a loan or a credit card.
Good credit is also indispensable when applying for a job or when looking for an apartment to rent. Without credit history, creditors would most likely decline your application.
Don't be afraid. Be smart. It's true that you can get taken advantage of and end up on the street (and taking a huge financial loss) if you are not careful. So the solution is not to give up entirely; the solution is to be cautious! Don't jump into a mortgage agreement you don't understand!
You see, that is what caused a lot of this mess. The reason so many people have lost their homes is two-fold. First of all, the economy and unemployment rates are both in very bad shape to date. This means that many people simply can't afford things like a mortgage.
The other issue that is causing people to lose homes is that they get into mortgage agreements and the interest rate fluctuates, goes through the roof, and then they cannot afford the monthly payments. Is this due to a deliberate booby-trap set up by mortgage companies? Perhaps.
On the other hand, when you sign a mortgage, this is a legally binding contractual agreement. You should never sign anything you don't completely understand or agree to, but especially not something with such a huge dollar value attached to it.
Face it: this is the biggest investment of your lifetime, this home you are financing! Do not take it lightly. Make sure you understand the mortgage before you sign. And don't be unrealistic about how much you can afford.
Both Smith Andrea & Alex Gwen Thomson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Smith Andrea has sinced written about articles on various topics from Debt Consolidation, Finances and Education. Andrea Smith is a writer and consultant with Consolidate4Free.com and has been providing consumers and business owners with Free Debt Consolidation Advice since 1990. For years she has helped people with loan and credit problems especially pertaining to. Smith Andrea's top article generates over 33100 views. to your Favourites.
Alex Gwen Thomson has sinced written about articles on various topics from Home Management, Income Tax Return and Wrinkles. Need a ? Visit a for the best deal. Alex Gwen Thomson's top article generates over 673000 views. to your Favourites.