What you need to know about good debt and bad debt

 

The proverb "it takes money to make money" defines good debt. It is a beneficial debt if it allows you to create additional income from your investment or through its appreciation in value. They usually have cheaper interest rates than other types of loans. But there is also a proverb that says “too much good is bad”. Overstretching your finances may leave you with insufficient funds to fulfill other critical financial goals or deal with unexpected events. The best example of good debt can be a home loan, as it has numerous benefits such as tax benefits, and the lowest interest rates, and it is an asset that you own for a longer duration. Another good example could be an education loan, as it also comes with lower interest rates and you gain vast knowledge from your education which stays with you for life and could be the best investment you could ever make. 

Any debt you take out to possess depreciating assets is considered bad debt. You've turned to bad debt if the asset you bought with the debt won't increase in value or create revenue. An example of a bad debt could be getting a car loan; such loans also have huge interest rates which are not ideal for good financial health. Credit card debt, personal loans, and buying expensive materials are some other examples that are examples of bad debts or can get you into bad debts. One big mistake that someone could do is paying off your bad debts with good debts, this can even take you into a larger debt trap. For example, mortgaging your assets such as a house for paying off your loans is not only taking away your asset but is also taking away the revenue it could make in the long run. 

If you think you have got some bad debts and can’t find a way to figure it out, you can consult a debt counselling in Mississauga which provides debt help if you live in Mississauga. Goodbye problem is a credit counselling company in Mississauga which can assist you with your bad debts and other financial problems as well. They can help you find a solution to every bad debt you have. 

You will have to keep track of your counsellor every month and every time you take a major decision regarding your finances, this way the counsellor will also be able to better understand your finances. The counsellor will provide you with some personalized monthly installments considering your income, loans, spending, payments, bills, etc. Be ready to share every small detail with your counsellor as he or she will pull your entire financial report and review it for providing you with a management plan that will pull you out of the bad debt and debt trap. You will have to follow a proper schedule advised by the counsellor for a period of time mostly until you recover your debts.