Good Debt and Bad Debt: Which one do you have?

Good Debt and Bad Debt: Which one do you have?

Almost everyone have debt, whether they are rich or poor and go to debt defense law firm to get financial help from the government. It is one thing that drives our economy and where a lot of money is flowing. Even the government is borrowing money from big financial institutions. Bank is the biggest lender controlling almost all the financial flows in any country.

There are 2 types of debt according to my two mentors: good debt and bad debt.

Debt is considered good if you will use the money to make more money. That is why borrowing money to start a business is a good thing. This is a common practice for rich people wherein they will use the bank money to finance an investment or expansion and make profit from it. You can also use the money to buy anything that can give you financial income like jeepney if you will use it for passengers, computer if you will use it for online business or anything that will put money in your pocket. The main goal of good debt is to make money out of the lenders money without any money coming out from you.

load good debt

On the other hand, debt is considered bad if the things that you will buy will not give you any value in return. Most Filipinos use this kind of loan to finance houses, cars, gadgets and other things. Debt is part of our culture and most of the time, the cause of several disagreements between couples, families and friends.

Credit card is the most widely used form of easy debt offered by the bank. This is a great asset to them as they are getting a lot of money to anyone using it.

Come to think of it. If you deposit your money to the bank, they will only give you around 1% interest. If you will use their credit card, they will lure you of saying that you only need  to pay 5% every month. However, if you will pay only this amount every month, your total loan can grow more than 40% in a year. Added to that are the extra charges and penalties you may incur everytime you have late payment. No wonder banks are rich, they took advantage of people who are not aware of good and bad debt.

credit card debt

If you have outstanding balance in your credit card, try to pay more than 5% monthly to avoid getting higher interest in the end.

Which debt do you have?


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About Richard Macalintal

Hi my name is Richard. I am a Registered Financial Services Consultant in Singapore. If you have any queries or you need help on your insurance policies and investment linked products, feel free to message me :-) We can have a cup of coffee while I do financial review and give advice with regards to your finances :-) Contact me thru email rlmacalintal(at) or SMS me +65 82235186. Disclosure: I am a Financial Consultant of AIA. The statements or opinions expressed on this site are my own and do not necessarily represent those of AIA.

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