When borrowing money or debt is good to recognize what kind of debts are favorable and which are not. Before by a new acquisition debt, check your budget and define your ability to pay. Calculate how much to assume a month additional costs to pay principal and interest.
Debt “good”
In general terms, it makes sense to borrow to invest or purchase durable goods or services that can enhance their value over time, so that in the future will be worth more than its initial price plus the cost of the financing or that generate revenues also . Thus, good debt, for example, is home purchase where you have certainty that it is a durable and likely to be recovered.
Debt “bad”
Debts “bad” include all that contract to acquire goods that do not need or can not afford, and do not necessarily going to increase in price over time.
It is also considered very negative use consumer loans whose repayment terms exceed funded product life. An example of bad debt is the vacation pay in installments over 36 months. What you’re doing is loading a debt over three years of something that burned for 15 days.
Debt “very bad”
Paying a loan with another turns out to be the worst business people can do. These debts are extremely dangerous because if left unchecked can cause a snowball effect and grow very quickly.
