Learn About Debt Management

Credit helps you achieve major financial goals, if used properly. But remember that every time you use credit, you incur debt. And we need to learn the terms and conditions associated with debt management, because ------

'Debt is a double-edged sword. Those who are careless with debt, can see an increasing portion of their income consumed by debt payments, jeopardizing their financial futures.'

For a secure and debt free future you need to learn about 'debt manangement'. This article would help you learn more about good and bad debts and debt catagories.

What are Good Debts?

Which are-----
- Used to buy something that will increase in value.
- Interest is tax deductible for federal income tax purposes.
- Finances something that will be used for a long period of time.

Bad Debts

Which are --------

- Used to buy something that will decrease in value.
- Non-deductible interest.
- Used to purchase luxury items.
- Finances something that is enjoyed only temporarily.

Debt Categories

Sound debt management begins with understanding your financing options. There are two major categories of debt — secured and unsecured.

- Secured debts are those that require you to pledge collateral to back up your promise to pay. Collateral is something of value which lenders can repossess if you fail to make payments on their terms.
- Unsecured debts have no collateral, only the promise you give them to repay the loan in full.

Typically, the property being purchased with the loan serves as collateral, such as a vehicle or home. Because secured debt exposes the lender to less risk, it usually has lower interest rates than unsecured debt.

Source link: The USA Educational Foundation