Small Business Finance :: Articles

Good Debt Versus Bad Debt

Good Debt Versus Bad Debt

Some people see debt as a curse.
Others see it as a friend.
Debt can make you miserable, or it can be used to make you wealthy beyond your wildest dreams.
The trouble is, how do we know what is good and what is bad?

Well it basically boils down to this. Good debt puts money in your pocket after you have paid for the debt (interest), and bad debt takes money from your pocket on an ongoing basis.

In todays society, the world has gone through an explosion in bad debt. In the United States for example, for every $1 a person earns, they spend $1.20.

In Australia things are getting worse too. We spend $1.02 for every dollar earned. Back in the 1980's we would earn $1 and save 20c.

Bad Debt

Debt Stressed?
If you're struggling to pay your debts as well as covering living expenses, we are here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

The single most influencing factor in this curse of bad debt is the credit card. It is so easy to get a credit card these days, and even school kids have them. Most people I know have several of them, and you know what, they max them all out. People get caught in this vicious circle of paying one card off with another, and still the interest bill compounds at an alarming rate.

It is not only credit cards that are doing the damage, it is also the ability to get three years interest free furniture and home appliances with no money down. This is a huge trap, and when people live beyond their means and do not have the means to pay back their debt in the given time they are hit with massive interest rates and so the cycle continues.

So that is bad debt, and I didn't even include cars, holidays and clothes, all charged up on your card! You get the picture.

Good Debt

Now onto good debt. Personally, I love good debt, and any wealthy person will tell you the same thing. With good debt you can purchase income producing assets that put cash in your pocket, even after the interest bill is paid.

Some examples of this include property, shares and stocks, and your own business. It even includes things such as art, wine and other rare collectibles.

By leveraging other peoples money to buy such things, you are after a time able to put yourself into a fantastic financial position, and you can now begin to pay cash for those bad debt items like expensive clothes and exotic holidays.

When I was at school there was never any lessons on good and bad debt, and I'm pretty sure they still do not teach effective money and debt management.

It is unfortunate that in a society such as ours, that the government does not teach this to every man, woman and child as it has a massive impact on our lives. Just look at the sub prime fallout in the States to see how people who overextended themselves are now really in trouble.

There is a way out if you are in bad debt, and there are resources out there to financially educate yourself before you do get into any trouble.

We only have ourselves to rely upon to shape our financial future, and the longer we leave it the harder it gets. Eradicate the bad debt from your lives, and begin to live without that heavy weight around your neck.

Time to Refinance?
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you.
Farm Equipment Finance and Loans
Looking for the best way to finance your Farm Equipment? Well, look no further! Simply submit our 2-minute business loan enquiry form ... and we'll help get you qualified for the best rate Plant and Equipment loan available from our national panel of independent business finance brokers. We also have access to the best rates and options for Business Cashflow finance for Farmers.


Finance Articles
How to Buy a House with Bad Credit
Most people would expect that a bad credit rating would make it impossible to get a mortgage to buy a home - but it's not as simple as that. Can you buy a house with bad credit? The short answer is YES, but it is not all that easy. - read more
Loan Finance: How to Shop Around Without Damaging Your Credit
If you are considering taking out a loan, you wouldn’t go out of your way to make it harder on yourself to get approved or to get a good interest rate, would you? Yet many loan applicants would enjoy a considerably better outcome on their loan application if they followed this important rule. - read more

Finance News

Personal Loans to help Australians in need: FSO
Oct 29 :: As Australia prepares to clean up following devastating fires and floods, Financial Services Online CEO, Andrew... read more

Small business loans to help Aussie businesses through tough times
Nov 27 :: Financial Services Online has today announced a new credit facility for Australian business customers who are seeking... read more


Need Help Finding a Loan?
Loan Amount:
Postcode:

All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Personal Loan:
A Personal Loan is a means of obtaining finance from a financial institution or financial product provider and the lending criteria usually depends on criteria such as personal income and expenses, assets and liabilities, employment status and previo