Can You Have Good Debt?
Is there such a thing as good debt, bad debt? We explain some of the differences for you.
The widely accepted assumption across society is that debt is a bad thing. There’s always discussion of toxic debt or a debt crisis that’s sweeping the nation. Although there are admittedly forms of debt that can be incredibly difficult to escape, you can often benefit from good debts. Here are a few ways you can make the most of debt without worrying.
Will it benefit you in the future
One primary feature of good debt is any that will, in the end, mean that you’re better off than you were before. The most common example of good debt is a mortgage. If it’s provided at an affordable rate, a mortgage lets you come out of repayments with a house that will almost certainly gain in value over time. In the long term, you’ll have profited from this debt, and it will give you a good home in the meantime. Similar good debts are student loans or small business loans, both of which improve your prospects in years to come and provide you with a big benefit going forward.
Is it affordable?
A significant amount of household debts are loans that are taken out in order to buy furniture or luxury items, which end up burdening you with high-interest rates. These are fundamentally bad debts, firstly because the moment the item leaves the shop it loses value. However, more importantly, these high-interest loans are designed to keep the debtor trapped for a long time to come. These often hurt the mental health and wellbeing of debtors and mean that anyone taking these loans out could be financially unstable for years to come.
Good debts have single, easy and consistent payments
Ultimately, the best debts to have are ones that benefit you and are easily paid off in a single monthly payment. This is a lot easier to manage than trying to keep track of several repayments at once. All of this can be managed with a Debt Consolidation Loan. This loan pulls all of your debts under one umbrella and makes repayments much easier than if they were scattered amongst multiple repayments.