Debt Is The Vehicle That Makes That Happen

Category: Finance.

Is there ever a time when being in debt is good? However, it is important to remember that being debt is not the same as being" crushed" by debt.

The answer to that question is yes. There is a difference and knowing one from the other is important. Debt is the vehicle that makes that happen. The reason we have debt is simple: We want to have something now but we want to pay for it later. Most consumers would be hard pressed if they had to pay for a home in cash, in full. By using debt responsibly, we can have those items now without having to save for years and years.

The same is true if we had to pay upfront for our new automobiles or any other big ticket item. In a perfect world, we would all have enough money to pay cash for the things we need and want, but the world is not perfect and without debt and credit, we could not sustain a high standard of living. Debt is good when it is used for the essentials. However, the key to using debt is to use it carefully, which is where a lot of consumers run into trouble. The less essential an item is to your life the less you should consider using credit to get it. Even small items, when charged to a credit card, can become incredibly, for example expensive as interest is tacked onto them.

The reason for this is simple: debt and credit are not free. As more and more of these items pile up through the use of the same card or other cards, the payments can become overwhelming. Most consumers can take on some debt and as they pay off those loans, and in full, on time, will be allowed a higher level of credit later on. The best way to use debt and credit is through discipline. It takes time to build a solid credit history which can lead to a higher credit score, and it is during this building up phase that consumers should not take on more debt than they can handle. In summary, debt is good when it is used for the essentials. Many consumers are surprised at just how fast their credit score can fall once they encounter some financial problems which cause late payments or no payments to ensue.

Debt is good when it is limited and controlled. In other words, if you feel that 30% of your income can be devoted to repayments of loans, then stick to that level of debt and do not exceed it. A way to monitor this is set a percentage of your income as debt related. Debt is good when you make it a habit to pay off loans, on time and in full. The money that you were using to pay the loan each month is now money in your wallet. The repayment of even small loans will good on your credit history and those repayments also free up additional cash.

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