When Is It Ok to Hold a Debt?Last Revised on June 16, 2010
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Almost everybody has accumulated debt over a period of time. Most of the debts are owed to banks and credit card companies for numerous things, but many experts agree that average Americans carry debt for many reasons that could easily have been avoided in the first. Often times the loan isn’t even necessary for the situation they want the money for.
There are only two occasions when it is definitely ok to carry a debt – home mortgage and students loans. The benefits of owning a house outweighs the drawbacks of holding a debt – even though you will be paying for the interest and financing, but in the long run you are owning a house – you have something to show. Unlike paying monthly for your apartment, the money isn’t really draining out of your bank account. Another time when it is good idea to hold a debt is for educational purpose – the money you borrow for your education will eventually pay off when you start working and earning a lot. This one is like borrowing a money for opening a new franchise business or buying a quality stock, but you are sure that you are sure that there will be profit at the end.
Other than these to, try not to finance long-term obligations with short-term loans. Don’t use any type of 18% credit card to fund a home addition that will take years to pay off. The installment loans is averaging about 8 percent these days. If you have no other option and must borrow some money, take out a home-equity loan. Lender will give you money at much lower rate – it could be as low as half the amount of generic loan.
We know that most average Americans are borrowing all the time, using credit cards for everything from gas to groceries to clothes and entertainment to paying cable and phone bills. If the balances are paid off within the grace period, you can avoid interest and other charges.
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