Good Loans vs Bad Loans loans

Good Loans vs Bad Loans loans
3 min read

GOOD LOAN VS BAD LOANS

Types Of Loans - Good Loans Or Bad Loans

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Everybody knows that debts or loans generally Come with inherent risk and additional costcosts to your monthly budget. They can be in the form of a home loan, education loan, credit card, or EMIs; debts are unavoidable in certain circumstances. When it comes to personal finances, it may not be possible to avoid liability altogether. But it is always possible to plan it cautiously.

The first question that should come into your mind before deciding to opt for a loan is whether it is a good or bad loan. Just as we separate the whites from the dark clothes to preserve the color while washing, similarly, to deal with your debt better, we will begin by distinguishing between good and bad loans. Now, everyone knows a loan comes with an additional obligation to your monthly budget and must be paid back. So how can it be good?

 

A GOOD LOAN

A good loan is more like an investment to improve your financial position. That means a loan will be considered as a 'good' loan if it increases your Personal Capital in the long run by either growing in value or by helping you generate income. These are generally low-cost debris that can be repaid in affordable installments.

Some examples of good loans

Education Loan


An education loan is like investing in oneself. First of all, it will improve your employability and pave the way for a well-paying career, ensuring that you will have a source of income to provide for your needs. Secondly, interest rates are generally very low for such loans and the loans are to be repaid in very affordable installments after you complete your education. Also, there are certain income tax benefits associated with the repayment of an education loan.
 
Home Loan

Home loans are again one of the cheapest kinds of loans available in the market. A home loan helps you acquire an asset whose value generally appreciates with time and it will save you rental expenditures, thereby reducing your monthly spending. The repayment is usually spread over a considerable period, like twenty years, and repayment of a home loan also comes with income tax benefits.
 

Other Loans


A small business loan can also be considered as a 'good' loan if you are confident that it holds financial benefits in the future. The interest charged might be a little high on them, but your business's future profits may ultimately help to boost your Personal Capital in the long run. While planning your personal finances, if you option a good loan, don't forget to evaluate the risks associated with it. For instance, when you take an education loan, the loan doesn't guarantee you a stable and well-paying job. Or, when you take a home loan, there will be additional expenditures
like municipal taxes and insurance.
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