Is it prudent to go through our lives completely debt free? Is it even possible? Can people afford to make cash purchases for virtually everything that they need or want?
Well, the truth is that you need access to credit at some point in your life. However, the most important factor when you borrow is that you need to distinguish good debt from bad debt.
What is Good Debt?
Here are some examples of good debt:
- Student loans
- car loans
- low interest debt
These debts usually move you forward in your life.
What is Bad Debt?
Bad debt is a debt incurred to purchase things that rapidly lose their value and do not generate income in the long run. Bad debt usually carries a high interest rate, i.e. credit cards or payday loans!
How to avoid bad debt
The rule of thumb is: If you don’t need it and can’t afford it, just don’t buy it. It’s that simple!
Credit card debt
If you buy an elegant $500 purse on your credit card, but can’t repay the balance on your card for months or years, that purse will eventually cost you double. In addition, in a year or two it will be out of style!
Payday loans and cash advances
These are examples of the most evil kinds of debt. Payday loans usually start a vicious circle. In order to get out of this, you need to come up with a huge lump sum payment. Interest rates and fees for payday loans are so outrageously high, that even our government has spent some of their time deliberating how to curb this industry and its questionable business practices.
Is bad debt keeping you down? There might very well be an easy answer. Contact A. Farber for a FREE, no-nobligation Debt Consultation. A Licensed Debt Relief Professional will assess your particular situation, and inform you of all the ways available to you to get out of debt.