Credit cards, mortgage payments, student loans… it’s difficult to never once go into debt today. You simply need to be wise about it! So, before you sign on the dotted line, make sure you understand the difference between good debt and bad debt:
A Good Investment Will Build Your Wealth
Just like any other decision, you make in life; you want your actions to elicit a return. If you borrow money for a purchase, you want your wealth to increase in the end… not the other way around. Your “indebtedness” is risky and inconvenient, so you need to consider whether the return will be worth it. For example, if you take out a loan to purchase a home or start a business, those decisions could very well elicit great returns. Credit Cards Lead to Unsecured Debt
Credit card debt is not something that makes financial experts or bankruptcy lawyers smile. It is typically the worst type of debt in their eyes. This is because going into debt with a credit card does not only fail to build your wealth, but it drives you deeper into debt through administration fees, interest fees, and yearly membership fees. Of course, the irony is that if you want to build your credit, you will likely need to use a credit card to do so. If you are cautious and understand how dangerous credit cards can be if used unwisely, you can build your credit successfully without any hiccups. What is the Interest Rate?
Of course, if you are going to go into debt, you want the lowest interest rates possible. When it comes down to it, no matter what kind of debt you are dealing with, anything
with an extremely high interest rate is bad debt. This is because the interest rate has a
direct impact on monthly payments, and the higher the interest rate, the less your wealth
can grow as a result of going into debt.
Financial issues can be intimidating, but don’t fret. Continue to educate yourself a little bit at a time and take care to create wise habits rather than poor ones!
Lewis and Jurnovoy is a local law office serving the Florida Panhandle. We specialize in bankruptcy law, including Chapter 7 and Chapter 13 bankruptcy. We will work to achieve the best financial remedy for your outstanding debts.
Comments
Post a Comment