{"id":84305,"date":"2021-12-09T10:00:00","date_gmt":"2021-12-09T08:00:00","guid":{"rendered":"https:\/\/www.bondora.com\/blog\/?p=84305"},"modified":"2021-12-09T10:00:00","modified_gmt":"2021-12-09T08:00:00","slug":"debt-the-good-the-bad-the-helpful","status":"publish","type":"post","link":"https:\/\/goandgrow.eu\/en\/blog\/debt-the-good-the-bad-the-helpful\/","title":{"rendered":"Debt: The Good, the Bad &amp; the Helpful"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">You might have heard that getting into debt is bad. However, debt isn\u2019t such a black and white concept. There are many reasons why getting into debt can be helpful. That is why it\u2019s <strong>important to distinguish between good debt and bad debt<\/strong>. If you do, you\u2019ll know when it makes sense to use debt to your advantage and when you should avoid adding debt to your financial plate.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/www.goandgrow.eu\/blog\/wp-content\/uploads\/image-790.png\" alt=\"How do you know if the debt you are about to take out is good or bad?\" class=\"wp-image-84306\" \/><figcaption><em>How do you know if the debt you are about to take out is good or bad?<\/em><\/figcaption><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-good-debt\">Good debt<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In some instances, <strong>debt can be a valuable tool for getting ahead in life<\/strong>. It can be used to pay for high-priced expenses, like a new car or house. For instance, most people can\u2019t afford to pay \u20ac500,000 in cash for a new home, but by taking out a mortgage, they can put a small percent down as a down payment and use debt to finance the rest of the purchase.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/www.goandgrow.eu\/blog\/wp-content\/uploads\/image-791.png\" alt=\"Don\u2019t be afraid to sign those mortgage papers if you think they will help build your future wealth.\" class=\"wp-image-84312\" \/><figcaption><em>Don\u2019t be afraid to sign those mortgage papers if you think they will help build your future wealth.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The most common forms of good debt include:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Mortgages<\/li><li>Student loans<\/li><li>Small business loans<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">What do all of these forms of debt have in common? <strong>They can help build your future wealth.<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>A mortgage to secure a property could add wealth through the increase in home prices in the future.<\/li><li>Student loans could help secure a higher-paying job<\/li><li>And a small business loan could help grow your own small business and secure more profits in the future.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">As you can see, good debt isn\u2019t just about obtaining the financing to spend today; it\u2019s about spending that money in a way that could generate even more wealth in the future.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><a><\/a>Low-interest rates and good debt<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">When interest rates are low, there are more reasons to take out debt. Imagine you want to buy yourself a new car. Also, imagine that the interest rate on a car loan is a mere 3%. Even if you had the cash to cover your new car expense, it might make sense to take out a car loan to finance the new purchase. That\u2019s because the interest rate you are paying is so low that your investments may return more than the 3% rate of interest on the loan.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In other words, you could use the cash that you would have otherwise spent on the car and invest it at higher returns. If you can return more than 3% on your investment, then, over time, you will have benefited from taking out this debt rather than paying for the car in cash upfront.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>Bad debt<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Unfortunately, in today\u2019s world, many people are all too familiar with bad debt. Bad debt is the type of debt that gets you in over your head; you\u2019re unable to pay back your obligations, and your interest payments keep rising. <strong>Bad debt will only get you into trouble<\/strong> and isn\u2019t as good as it may seem at the time you\u2019re swiping your credit card. The most common forms of bad debt include credit card debt and high-interest personal loans.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/www.goandgrow.eu\/blog\/wp-content\/uploads\/image-792.png\" alt=\"Think twice before making your next credit card purchase. It could weigh you down later.\" class=\"wp-image-84318\" \/><figcaption><em>Think twice before making your next credit card purchase. It could weigh you down later.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For instance, you can use credit card debt to pay for just about anything you desire. But this is a form of bad debt used to make purchases that can\u2019t be paid back or when the debt is used to finance a purchase that depreciates in value. So, you could use debt to finance the purchase of that \u20ac500 handbag or gaming console you\u2019ve been dreaming of, but because it will lose value over time, you could end up hurting yourself financially in the long run.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><a><\/a>How to avoid bad debt:<\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Only take out debt you are <strong>sure you can pay back<\/strong> on time<\/li><li>Think about the <strong>purpose<\/strong> <strong>of your debt<\/strong> before taking it on<\/li><li>Ask yourself <strong>how important <\/strong>the debt is to your life<\/li><li>Only use debt as a means to <strong>build wealth<\/strong><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>The (not so) ugly truth<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Debt isn\u2019t good or bad in and of itself; it\u2019s about how you use it.<\/strong> Even supposedly bad debt like credit cards can be helpful as long as you can pay back the debt on time. That\u2019s why there is no one correct answer as to whether or not you should take on debt. It\u2019s dependent on your current financial standing, how you will use the debt, the rate of interest, and other factors.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You might have heard that getting into debt is bad. However, debt isn\u2019t such a black and white concept. There are many reasons why getting into debt can be helpful. That is why it\u2019s important to distinguish between good debt and bad debt. If you do, you\u2019ll know when it makes sense to use debt [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":84306,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[119],"tags":[103,104],"class_list":["post-84305","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-well-being","tag-english","tag-finance-tips"],"acf":[],"featured_image":null,"categories_names":["Financial Well-being"],"category_name":"Financial Well-being","_links":{"self":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts\/84305","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/comments?post=84305"}],"version-history":[{"count":0,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/posts\/84305\/revisions"}],"wp:attachment":[{"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/media?parent=84305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/categories?post=84305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goandgrow.eu\/en\/wp-json\/wp\/v2\/tags?post=84305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}