After writing and posting the article "Until
Credit Do Us Part," we received a few emails from women
who felt they understood why all debt is bad; the reason
being, is because it interfered with their personal life.
One woman in particular wrote " I finished medical school
and a medical residency, but was told by a close relative,
I would probably never find a husband because I have excessive
school loan debt." She then wrote and said, "now
I understand why my relative made such a statement, after
reading your article."
I need to clarify something. Even
though this website has nothing to do with finding husbands,
I just need to say that
I don't believe that a husband is something you "find." Enough
said about husbands.
Now I need to clarify the difference
between "good
debt" and "bad debt."
Examples of bad debt are:
-Debt accumulated on items that do not increase in value
over time.
-Debt that increases the total cost of items by two to three
times the original value, when you consider the interest
charged over time.
-Debt that charges compounded interest. This means the interest
is charged on the outstanding balance, not just the original
principle. Therefore you end up paying interest on interest
and principle, and interest on the previous interest and
principle.
-The worst part is because most of these goods and services
decrease in value over time, many of them you may not even
own by the time you are finished paying for them.
Examples of good debt are:
-Debt accumulated on goods or services that increase in value
over time.
-Debt that charges simple interest, instead of compounded
interest. This makes it easier to pay ahead of schedule and
pay off the charges early.
-Examples of good debt are home loans and school loans.
-Provided you acquire payments that your employment can bear,
these are considered good debt because most homes increase
in value over time.
-School loans are considered good debt because-
#1) they
allow you to acquire a job
#2) most of the jobs will
increase in income over time
#3) most school loans charge
simple interest, making it easier to pay them off early,
by making small additional payments.
-Business startup loans are also a form of good debt, provided
you have expertise, experience, and proper preparation for
the business you are starting.
I hope this clarifies things a bit.
Find our more here[click
here]
Lois Center-Shabazz is the founder of MsFinancialSavvy.com
and author of the 3-time award-winning personal finance
book, Let's Get Financial Savvy! ISBN
#0971979502.
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