Being in debt is not terrible if you know how to manage it

Many people will be afraid to be “in debt”, but did you know that being in debt is not as terrible as you think? Today, ACU PAY will introduce “Good Debt”, a debt that may generate income or be beneficial to the debtors in the future.

What is a “Good Debt”?

“Good debt” is a debt that can be useful for debtors in the future such as loans for house, car, or investment that can expand your business. This is the example of being in debt to generate income in the future: You take a loan to buy a condominium once you have already calculated that this will not affect your reserved money, then you can rent out the condominium at the higher price that covers the condominium installment. This is considered good debt since it can make a profit.

However, you have to be careful because good debt can become bad debt. For example, when you buy or invest in something too much and you are not able to pay the monthly installment, making you do not have enough reserved money to cover the expenses that you have to pay. Therefore, the good debt turns into bad debt.

Plan to create “Good Debt”

Those who have a plan to take out a loan or invest need to come up with a comprehensive management plan to pay debt systematically.

Know your monthly finances. You need to know how much money you have to allocate to pay for what and when to pay so that you can have a reserve to pay off the debt.
Systematically clear your debt and manage all of your debt to be in one place to reduce the complication in monthly payments so that you can pay your debt on due. Sometimes, defaulting on a debt can cause debt problems in the future.
Lower interest rates. Normally, if you owe a certain amount of debt, interest rates may continue to be compounded. However, if you pay your debts on time and have a good credit history, you may be offered a good deal by financial institutions, such as refinancing, and lowering interest rates, which is another way to ease the burden of debt.
Paying debts at the minimum, makes your debt compounded, and makes it harder to pay the full amount of debt. Having good financial planning or income and expenses record planning will make borrowers pay their debts in full faster.

Debt collection may not be terrible, but requires prudent financial regulations to maximize profitability and benefit from debt. Planning to meet the debt repayment cycle may also increase our credit profile.

References from
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