Debt

Debt is a sum of money that is owned or due. There are two kinds of debt good debt and bad debt. Is debt really good? Maybe or maybe not let’s figure it out.

The debt which helps us buy appreciating asset is a good debt. In the long run, the asset will be generate more income for you. Hence, you will be easily able to pay back the loan. For instance, Reliance build the huge Jio empire on loan and have recovered the equivalent amount by selling less than 40% stake in Jio. Jio might be an exception. But there are many more small business owners who take loans and pay them back and are able to grow their empire. Getting an education degree on educational loans is good debt too as it helps to make us more qualified and knowledgeable, resulting in higher pay scale.

The debt which helps us to buy depreciating assets is a bad debt. There are instant EMI’s now a days, buy now and pay back some amounts monthly. Have you ever thought how the companies are able to give us interest free loans? The financial companies charge the product companies for interest. Ultimately the consumer is paying on the higher end. It takes patience to wait and buy things when one can easily buy them on loans. Many people end up paying 50% of their income into EMIs. Be careful if you are falling for the same trap.

People buy stuff via credit cards since they get card points which later help them to buy a discounted airline ticket. However, if you just miss a month on the credit card payment you are on the losing side, if you have the discipline to pay back every month obviously you must enjoy the discounted airline tickets.

Now you can evaluate your current debts, if you have any or you plan to have one.

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