Definition: A debt is an amount that is borrowed, and thus to be repaid, for the purpose of financing a project or resulting from the use of a credit card.
What is a claim?
Entering a loan is sometimes a necessity. On the other hand, it is essential to be well informed about the consequences that this could have on your budget.
And understanding the difference between bad and good debt is crucial as bad management can create litigation. Discover it all through our computer graphics.
Definition: A good debt is a sum contracted for a specific and justified purpose, usually for improvement. It does not generate litigation.
Its purpose is the realization of a profit or increase of income. Enter this category:
- the student loan to finance studies;
- the renovation loan to increase the value of a property;
- the mortgage to buy a house or apartment, in order to live or rent it;
- the loan to create or buy a business.
Definition: a bad debt is a borrowed sum that generates no revenue but creates a constant debt. It is often contracted for lack of money available for purchase of a good. In case of non-reimbursement, you may find yourself stuck at the national bank. Are considered as such:
- the use of consumer credit: they are not necessary, particularly in view of the financial situation. Examples: the latest iPhone, an Apple MacBook Pro computer, a beautiful ring, …
- credit cards: If you do not repay the expenses on time, you will be charged interest, which significantly increases the cost of your expenses, and you will have spent more than expected.
- personal loans and purpose loans such as renovation loans, mortgages, car loans, …
It is therefore crucial to avoid unnecessary expenses when one has a limited budget to limit the risk of litigation. So, opting for a used car may be a solution in case of real need. And in this case, it is possible to compare different offers of used car credit.
If you really need credit, it is better to go for a shorter repayment loan and pay the monthly installments on time to avoid extra spending. But to limit the claims, it is advisable to pay in cash or to set money aside to book the book in case of hardship.