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Let talk about Good and Bad Debt

There is a lot of jargon thrown around in the finance industry. A couple of phrases you may or may not have heard of are 'Good Debt' and 'Bad Debt'. So what do these terms mean? And how can any debt be "Good"???

GOOD DEBT is debt incurred to purchase an asset or investment that will increase in value and give you a positive return for your money in the long run.

A Mortgage, for example, is considered good debt as property is an asset that will grow in value. A Mortgage over an investment property is even better Good Debt as it gives you a return (Rental Income) and is also Tax Deductable.

Other types of Good Debt are things like Vehicle Loans, particularly if the vehicle is for business purposes and Loans for other types of investment.

BAD DEBT is debt incurred for items that loose their value and/or do not provide an income. Typically these types of loans also come with a higher interest rate as there is no security

Credit Cards are a form of Bad Debt as they typically have higher interest rates and are used for purchases that do retain their value.

held over the debt.

Credit Cards are one type of Bad Debt and 'Pay Day' loans are typically the worst with high interest rates and over short terms.

So when you are reviewing your monthly budget it is wise to reduce / payout your bad debts first.

A Gadsden Finance Mortgage Broker is the perfect person to call and chat to to get the ball rolling and get you on your way to a financially freer lifestyle!

Call 03 5443 9098 for a chat today.

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