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Debt Is Not Bad At All

People tend to classify debt as bad and can cause more troubles into their lives. I disagree with them as debt is not bad at all. It all comes down on how we use the money after we borrowed it. Also, if you want to know the two types of debt, then go ahead and read the remaining content.

One type is the good debt. This debt can improve your current situation and achieve the life you dream. How does this help you? By borrowing money from banks or other institutions, you take advantage of having huge cash on your hand. For example, the bank would charge you a total interest of 22% for the money you borrowed which you are going to pay for 24 months/2 years. Let's say 20,000 pesos and you will pay this (including tax) for a 24-month installment. 1,017 pesos is the money you are required to pay every month and the total amount of loan if you added the tax is 24,400 only.

Imagine your business earns a 5% earnings per month. You can get 5,000 in return after 5 months considering you do not reinvest the interest and that would be enough to pay the interest of your loan. In the six month onwards, just keep paying your bank loan and when the 25th month comes in, you're already paid. Now whatever your gains are, it's all yours. It depends on you whether you will use the money to reinvest in that business or start a new one.

This is one of the advantages of good debt.

Let's go to the second one, the bad debt. Most people consider debt as bad because they usually witness some people who swipe or use credit card impulsively without minding whether they max out their credit limit. By doing this, they will get drawn more into debt and that's where people assume as all kinds of debt is bad. Another thing most people do is ask for a loan either from banks or friends just to get the thing they badly want.

I hope I explain to you the two types of debt and you get to know their differences. The next time you need money for a thing that will improve your life and earn you money, don't ignore borrowing money from banks or other legitimate institutions. Just don't forget to return the money based on the agreement between you and the lender.

Thank you for reading.


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