Guaranteed Online Personal Loans

How Debt Chases Us

You must find out what the bad debt is and what the good debt is. Use this as a rule of thumb: If you are purchasing an item that will NOT go up in value, and you cannot afford to pay cash for it, then you really CANNOT afford it!

Many of us like to sign up for store credit cards thinking that if we do make purchases of these cards, we will be getting 10 to 20 percent off in discounts in almost all of our purchases. While this is true to an extent, the savings will vanish unless the bill is paid off immediately.

Here are some good debt consolidation facts that tell it as it is. If you miss one or two payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27 to 30 percent.

Next, out of a random sample of three million American consumers (included in Experian’s National Score Index), 51 percent of them have at least two credit cards and 14 percent of them have ten or more credit cards.

Third, if you spend more than 50 percent of your credit limit each month, this indicates to the Credit Bureau that you do not have enough cash on hand to meet your monthly expenses. This will term you as a high credit risk and will actually reduce your score by 60 to 70 points overnight.

Good Debt

A list of good debt: mortgage loan, business/commercial loan, real estate loan, home equity line of credit and school student loan.

Good debt is investment debt that creates value. This is debt that is tax-deductible. It takes up more debt that builds wealth over the longer term, which will make a good profit and capital gain.

If you take a home equity loan because you have 17 percent on your credit card, and you go with a 6 percent loan that’s tax-deductible, that’s good debt.

Other good debts are those that are taken out to generate high returns on stock market investments, mutual funds, etc. Look at good debt as something that is always growing for you in a good way and helping you with taxes by the way side.

Bad Debt

This is when you buy something that goes down in value immediately and has NO potential to increase in anyway.
Say you purchase a 21-inch television for $1000 and put it on your credit card. Within one to two years the television now is only worth $200. What’s even worse if you have not paid off your credit card for the payment of the television, you are now paying interest and losing more.

The items on a bad list are: auto loans, credit cards, store credit cards and gambling debts. As soon as you walk out of the door you have already lost value from any item listed here.

It is up to each of us how we earn and spend our money. Once again, without a plan and going forward on emotions you will go fast and deep into the never, never land of dark, deep debt. By being frugal at first, planning and staying the course you will be more than happy with the final results.