Friday, 30 September 2011

Difference between Good Debts and Bad Debts:

Difference between Good Debts and Bad Debts:
Every time I see or listen to the word "debt" alarm bells in our heads and actively looking for a way to escape. The first thing to understand is that debt is not always bad, and does not mean you are in trouble. For lots of, the debt could be a loan or mortgage, or a huge expense incurred. However, it is necessary to recognize that there are different kinds of debts, both different and polar opposites of each other!
You can not worry thinking that both are the same, so the first thing to do is learn about the forms of debt, nice debt and bad debt. All it takes is for you to plan, prepare and act accordingly to have a secure future, at least when it comes to finances

Bad Debts:
Let's look at what is a bad debt is first before we talk about good debt! The bad debt is the kind of debt you invest the money, but nothing is gained. It might also be the class to spend more on the product than the actual cost of the product.

For example, imagine you buy a DVD that costs $ 40 by credit card. You will be charged 20% more if you do not pay the bill on time. What this means is that you have paid more than the value of the DVD and therefore lost much more money. This is a classic example of bad debt. Another example would be if you drive into debt to pay for a holiday, then it will hurt you badly.

Bad debt stems from overspending, going overboard in activities / things that are not needed and
are not statements!

Good Debts:
On the other hand, good debt is a total opposite of the bad debt. Here, you can spend money and be sure to earn double or more. For example, you take a loan for a title that is sure to be gaining much more after graduation. Similarly, investment in gold shares is also a good debt, because in most cases, if you are a smart investor, you will earn higher than its investment.

Good debt is known as "leverage." That debt will have to make money for him at a later date. You can invest in a business; you will start making profits for a period of time. Therefore, the $ 500 you invested could earn U.S. $ 5000. Even car loan is good debt. If you are wondering how to think about it?

You are the savings in transportation and other expenses you might incur if you do not have a car. Any expense that will save and protect your income is a good debt!

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