Last Updated on Apr 3, 2020 by James W
When you want to live comfortably and maintain the pace of life in this modern world, you may need to take some money on credit but as long as it is within manageable limits it is good to have some debt. You may also find times when you need to pay off your child’s tuition fees, medical bills for the family when borrowing money may be the most effective and immediate solution. However, when your financial condition becomes too pressing and burdensome it is bad news for you. It happens especially when you do not earn enough money to pay off the whole amount that falls due on you every month.
A Good Debt
Debt can be good for you when you do not have to pay hide and seek with your creditors and this is only possible for manageable debts. Also if you borrow some money which will directly or indirectly translate into generating more money in the near or distant future, the debt is considered to be good. Therefore, when you take money on credit to purchase an item of more value you are creating a good debt but of course the debt has to be in manageable proportions at all times so that you can make timely payments and keep your credit rating safe.
The Mortgage Debt
The best example of good debt is property and mortgage debt as the value appreciates with the passage of time and may generate income in the long run. A mortgage loan can have tenure of ten to even forty years, depending on the amount borrowed and the lending policy of the creditor. But you will see the value of your property appreciate considerably within a matter of just ten to fifteen years, probably double the price you bought it for, therefore generating you lots of money. Selling your property at the right time can give you double or even triple the amount of purchase.
Investment Property Borrowing
When you borrow money to buy or even improve an existing investment property, be it residential or commercial, is always a good debt. The money that you may earn from letting out the property may me more than enough to cover up all your monthly dues, provided it is managed properly either by you or by professionals. If you think about the long term benefits, then you can maximize the profits from such a property with ease. For commercial purpose, if you can rent a bigger space, buy new hardware, hire more people, expand your business, and introduce fresh capital with the borrowed money is also good.
Some Other Examples
Taking and education loan to upgrade your career, making a switch from your old loans of higher interest to debts with lower interest rates and longer maturity, buying a car on loan and settling medical bills are all examples of good debt. You can click here to know more. Therefore, you can see that having some sort of a debt is always good as it may generate income in the future or keep you in good health so that you can work and earn more. But most importantly, it is you who make a debt good by managing it properly and making all the payments on time.
