Article
Bad Debt
Bad debt are debts like credit cards, car loans, etc., and normally include incurred debt on anything that depreciates. From the business perspective a bad debt may be viewed as when collection of payment for goods or services
fails and the business is left with a loss. But this definition does not apply well to the consumer. Carrying debt is a lot like carrying excess baggage wherever you go—it’s a burden. Now when was the last time you said to yourself “I like this baggage constantly wearing me down?” Logic says; if you have to carry it, it is a burden, so there is a sense then where any debt can be viewed as bad debt.
Many find debt unavoidable and there are many reasons why:
- Securing a mortgage to own a home
- Acquiring student loans to gain a valuable education
- Using collateral such as an auto to build creditworthiness
- Unexpected emergencies such as a death, fire, or mechanical breakdown
Let’s face it; we all have to deal with debt. But dealing with debt doesn’t mean we have to throw common sense out the window. Payday loans are a good example. A payday loan company is the science of lending money under a contract targeted to a specific segment of society and intends to insert a certain amount of control over their financial future so as to keep them in debt. It’s predacious by nature and ought to be illegal. A child says “I’ll give you a nickel and you give me a dime” and another child says “no way! Do you think I’m crazy?” Now that’s common sense. But adults are giving away dimes for nickels everyday, in fact one recent article cited payday loan companies reaping a whopping 400%. Now that’s throwing common sense out the window.
More than ever, in a society where lending companies are smiling through crocodile teeth, consumers must become educated about debt. Ethics against squeezing every last red cent out of the consumer is fast becoming a topic of taboo discussion. The cold nature of the business world means consumers must be informed on financial matters before debt becomes a trap that even Houdini couldn’t get out of.
Another reason debt is bad occurs when a consumer needs a loan for a mortgage. Lenders such as banks will carefully evaluate the creditworthiness of their client and often a history of debt will be cause for denial of the loan. This debt to income ratio must fall within the guidelines of the lending institution and generally must not exceed 36 percent of your gross monthly income. Patterns of excess debt, especially with credit cards, are major warning flags against granting a loan request.
Some advise that certain types of debt is actually “good” and though I will concede that some debt is necessary, as stated above, it is the consensus of SoLongBills that it is ultimately better to be debt-free than debt-burdened. Gene Jolley, President of SoLongBills and creator of The Rapid Debt Reducer software, has the motto: “Helping people to achieve True Financial Freedom.”
