We may hear about good and bad debt and think about whether the borrowing that we are doing is good or bad. This is a really sensible approach to have as you need to think about what will work out well for you. Therefore, you may be asking yourself whether short term loans are good or bad debt. It is a good idea to know exactly what is meant by good and bad debt and then you will be able to make a judgement.
What is Good and Bad Debt?
There are a few different ways of differentiating debt into good and bad. It can either be to do with what the money is being used for or how you go about getting the loan. Some people feel that a loan should only be used for a good purpose. What they consider to be good would be where you use it to better yourself such as using a mortgage to buy a home which will mean you will no longer have to pay rent or using it to pay for a course which will advance your career. However, using a loan to spend on extravagant items such as your third holiday in a year or some expensive jewellery would be considered to be bad debt. Also, it is considered to be bad debt if you take out a loan without comparing types of loan to see which will suit your needs the most and the different lenders to see which will offer the best value for money. Also you need to check the repayments and see whether you will be able to afford them.
Are Short Term Loans Good or Bad?
So, deciding whether a short term loan is good or bad is not something we can do on a general basis but it has to be looked into on an individual bases. So, if you are considering one then you have a lot to think about. You need to think about your reason for borrowing and whether it is a good one or not. Then you need to think about the loan and whether it is the right type to suit your needs. You then need to think about whether you are able to repay the loan. There will be a bit of calculation to do here. You will need to think about whether you are capable of repaying it in normal situations by looking at your bank statements. You will also need to consider whether you will be able to repay it at the moment considering what is happening to your finances right now. Also think about what else you have to pay for and whether you will be able to afford that as well. You should also consider whether you think that the loan will offer you good value for money considering how much you will need to repay and what the cost is.
Many people will jump to conclusions when it comes to short term loans and just assume that they will bad. However, it really depends on what you need the money for and what your situation is as to whether you think that it is bad or good. It is worth having a think for yourself and considering all of your options so that you can make the right decision for you. It may seem a pain to do this, but it could save you having any regrets in the future. So, make sure that you do give it some thought as it could be time very well spent and it will mean that you can move forward knowing that you have made the best decision with regards to your own personal circumstances.