‘Debt’ is not always be a villain, let’s get to know about Debt that we should have

People  seem to have a negative opinion when talking about debt. However, having debt is not always a bad thing if we know how to use those debts and those debts should generate income and make us get wealthy. What are the debts that we should have? Let ACU PAY explain it to you.

What is the difference between Good Debt Vs. Bad Debt?

If you would like to know the right way to use debt, the first thing that you need to know is to differentiate between good debt and bad debt. The following are the definitions of these two types of debt.

1. Good debt generate income

  • Loan debt for business: Make a business grow in income
  • House loan: This will save us money on rent for housing, including condominium loan for condo rent-out and collect rental money as income. During the rental period, the value of houses and land is likely to grow further.
  • Loan debt for education: It is classified as another type of good debt because, in general, investment in education often increases the opportunity to increase long-term income from work.

This type of debt is considered to be good. Good debts, if used correctly, can be more beneficial and enriching. In general, the more good debt you have, the more it gives us more cash flow.

2. Bad debt is a debt that generates little or may not generate any income

  • Debt from personal need: We owe it to our spending in buying goods, using the money from the future, spending on something that does not contribute to our income.
  • Credit card debt: Cash card or shark loan, which usually has higher interest rates than other types of debt.
  • Gambling debt

Too many bad debts will lead to financial failure. The more bad debt we have, the higher the cost burden that will result in loss of financial discipline. For example, defaulting on debt payment, Deferring payment of debt and resulting in losing financial credit. In the future, it may be difficult to apply for a loan to make good debt and accumulate endless debt.

That’s the reason why those who are in bad debt and have not stopped creating debt yet should start to adjust spending behavior. They may seek additional income channels, reduce unnecessary expenditures, and intentionally repay bad debts, especially high-interest loans, as soon as possible. This will help us get out of that bad debt and not miss a good opportunity in the future.

If you are going to have debt again, it is recommended to have good debt because it generates more income than interest burdens because good debts generate cash flow from good debt creation. However, the ratio of liabilities to assets should not exceed 50% to know the ability to repay all debts without being troubled.

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