The Times When Debt Isn’t a Bad Thing
We tend to think of debt as being a universally bad thing, but when you take a step back and think about it, that really is not the case. Although we should all probably be trying to keep our debts to a minimum, there are plenty of times when debt is by no means a bad thing. Here are a few examples, of when you, perhaps, shouldn’t be worried about getting into a little debt:
When Debt is an Investment
If you’re using debt to invest in a home for your family, a car that will enable you to take that great new job, or your education, then it can’t really be seen as this big bad things to avoid because it is giving you opportunities to make more money and do more things with your life in the long-term.
When It’s Paying Off Your Debts
Getting yourself into debt to pay off your debts might sound completely absurd until you remember that is what debt consolidation basically is. When you consolidate your debts, you take out one big loan to pay off any other small loans, credit card debts etc., that you have, so that you can pay a smaller, more manageable sum each month, with a lower interest rate. In this case, taking on that debt is eminently sensible because it will save you money over time.
When It Boosts Your Credit Score
Most people know that taking out too much debt or defaulting on one’s debt repayments will cause their credit score to fall, but fewer people realize that having no credit history at all can keep a credit score down. You can fix it by applying for a credit card or taking out small loans and paying them on time every time. By doing this, you will boost your credit score, which could help you to get that mortgage, business loan or job that you so want in the future. That’s not bad, is it?
When You Have an Emergency
Using debt to deal with emergencies is less of a good thing that the other examples above, but if you have an urgent medical situation that you aren’t covered for, you need to take your cat to the vet, or you simply must fix the car so you can actually get to work, it isn’t necessarily a bad thing so long as it’s manageable. Of course, starting an emergency fund would be better!
When You Can Afford to Pay It Back Quickly
Despite the fact that debt can be a good thing in all of the above scenarios, and probably a few more I haven’t thought of, debt can only ever be somewhere approaching a positive thing when you can afford to pay it off, and ideally when you can afford to pay it off quickly, so that you pay less interest. If you can’t afford it, then no matter how good the reason for getting into debt, it is going to be a bad thing for you. Bear this in mind before you even think about borrowing money.
Make smart choices surrounding debt, try to keep borrowing to a minimum, and you’ll never have to worry like so many people who are up to their eyeballs in debt do.
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