4 Things To Know About Debt
Have you been thinking of getting a loan like the one that Maxlend loans gives you? Before you jump the gun and sign a loan contract, you should consider these 4 key points about debt. Keep on reading to see how you can improve your finances.
Nearly Half of America is in Debt
You’d be shocked to find that approximately 47% of Americans are deep in credit card debt. That means approximately 120 million people are struggling to pay off their credit card debt. If you’re a millennial, you’re likely to be affected by this debt more than any other age group. There are various factors that have contributed to this spike. For instance, student loans, unemployment, and unequal pay have been the main reasons. What’s even more concerning is that your average American household has a credit card that has more than $10 000 in debt. This also means that your household is spending a considerable amount paying the interest on your credit card debt.
Good Debt does Exist
Did you know that there’s a difference between bad and good debt? If you want to make better financial decisions, you should understand how to use good debt to your advantage. The thing is, you can take out debt to ensure that it works in your favor. But how? Is that what you’re asking yourself? Let’s say that you want to increase your net worth by buying an asset like your home. If you’ve heard the saying that goes “it takes money to make money”, then you should understand that taking out a mortgage loan to finance your purchase is considered good debt. This type of debt helps to improve your creditworthiness. Moreover, you should have a certain credit profile to ensure that you can get approved for what’s considered good debt. Essentially, the main idea behind good debt is to increase your overall credit profile and, ultimately, your net worth.
Debt is Generally Bad
While you can find yourself considering taking good debt to improve your credit profile, you shouldn’t forget that most debt is bad debt. But do you know what’s considered bad debt? According to research, any debt that you take for any asset that depreciates is considered bad debt. For instance, borrowing money to buy your car is one of those financial decisions that aren’t a good idea. The fact of the matter is that your car depreciates in value from the moment that you seal off your deal. However, if you have to borrow money from a lender to finance your car, you should consider choosing a loan option that has little to no interest. This is why it’s important for you to compare different quotes before you commit to taking out a loan.
Pay High-Interest Debt first
Paying off debt is different for everyone. For example, your debt payment plan is different from your friend, Joe. So, there’s no right method that you should follow when you start your payment journey. Yet, starting with your high-interest debt is advisable. When your debt has a higher interest rate, it follows that it’ll take you longer to pay off when you compare it with the rest. If you want to get a handle on your debt payments, then you should consider starting with your high interest rate. Pay the maximum while you pay the minimum on your other debt.
In summary, it’s important for you to find a way to make your debt work for your financial needs and obligations. Essentially, you should find a way to decrease your debt as much as you can.
