At some point of time we all need to borrow money. Borrowing money allows consumers to obtain large ticket items like a home or a car. Borrowing can also be a way to establish a credit history or improve a credit score. You basically borrow money to meet your needs and then repay it over a period of time at interest. It should be viewed as a means of bridging the gap between your need and your inability to find it on your own right now. In this article we will discuss the difference between good debt and bad debt and best way you can borrow money online.
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What Is Termed As Good Debt?
There are many reasons why people borrow money, some of which are good and some of which are not.
If you want to buy a costly item as part of your long-term plan, you could borrow money. Buying a house is a genuine reason where you need to borrow money in the form of a loan. Few people are able to save enough money to purchase a home. To purchase the house, you borrow money from the bank. You repay the monthly installment each month. Until the loan is paid off, you continue doing this for a number of years. As a result, the house is an asset that you own. This can be termed as good debt.
Here are some more examples of good debt:
- A common strategy for developing credit discipline is to take on manageable debt. Similarly, you need to use credit to build a credit history for the larger ticket items or milestones you may want to fund in the near future. If you take small amounts of debt and pay it off responsibly you create a good track record which helps you to get loans in the future.
- One more type of debt that can be considered ‘good’ is educational loan. A student loan is an investment in your education that could help you make more money in the future based on your new skills or knowledge. When you become a more financially stable consumer, hopefully for the rest of your life, these kinds of debt can offer borrowers a higher rate of return.
- If you own a business and have a business idea that would help you make more money, financing those growth projects might be a good option. It actually lowers the risk of missing out on an opportunity because you don’t have access to funds.
The underlying message is that the good debt is designed to fund your long-term net worth and financial well-being. If your goal for borrowing money is for a different purpose or goes in a different direction, it would fall into the ‘bad debt’ category and should be heavily considered against other viable options.
Read: How Saving Money Becomes Easy With The Help of Community?
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What Is Termed As Bad Debt?
Bad debts can be defined as debt that does not increase in value or grow your net-worth. To better explain, it is not a wise idea to borrow money to buy something that you use up, such as food or clothes. Even after you’ve used the item, you may still owe the loan. Therefore, borrowing money to purchase shoes is illogical due to the possibility that the shoes will be worn out by the time the loan is paid off! Another example of bad debt includes credit card. Not only are these debts often used for consumables that don’t generate income (eating out, gas, entertainment, vacations), they have quite high-interest rates making these items cost far more than the actual price.
When Should You Borrow Money?
Emergencies do occur from time to time, like when a car breaks down. Borrowing money to fix the car might be your only option. However, you should take out insurance or make plans for emergencies to safeguard yourself from such situations.
Before you borrow money, always make sure you actually need to borrow it and ask yourself a few important questions.
- Do I actually need the money?
- Are there any other options for acquiring the funds I require?
- Will I be a position to pay back the money I’m planning to borrow?
Read: Need Money Urgently? 10 Ways to Get Instant Cash for Emergencies
Can You Save Up Or Use Savings Instead Of Borrowing Money?
Instead of taking out a loan, you might want to save some money each month if you don’t need the item right now.
Saving up before you spend
If you can put off making a purchase and save money instead of using credit, you won’t have to pay any interest.
For example, if you wanted to buy something that cost Rs 60,000, it would take you a year to save Rs 60,000 if you didn’t have any savings but could save, say, Rs 5,000 per month. In addition, you would have earned interest.
Money Club platform is the best way where you can save and earn interest. The best part that if within the duration of you need money urgently you can borrow money as well.
Different Ways to Borrow Money In India
What is Money Club?
Money Club is an app based saving, borrowing and investing platform. It is an online committee platform. A committee is a type of community saving circle where each member commits to put in the same amount each month for a set duration. Each committee member receives the whole “pot” of money once during the rotation. So, you can upgrade yourself from old committee system to Money Club. Money Club is the first ever digital social network dedicated to helping members earn money, save money and support one another financially. It enables group members to borrow money online for expenses, make miscellaneous payments, or avail funds for an unforeseen event.
- It is a platform from where you can borrow money online by placing a bid as and when required and the money is in your bank account in six to eight hours. You can borrow a sum several times greater than the amount you have invested.
- It is a platform where you can make your money 2 times or 3 times by participating in various clubs.
- It is a platform where you can earn interest as high as 25% on your savings.
- It is a platform where you can earn referral income and bonus for referring people to use the Money Club App. You can earn Rs 18000 by referring 20 members.
- Money Club is an app where you can save, invest and borrow money online sitting at home.
Money Club is not only a platform to provide you a systematic saving scheme, but we make sure that you have an easy access to your savings and the flexibility to borrow much larger sums, when you need it the most. Be smart; avoid the pitfalls of borrowing at exorbitant costs from money lenders and other financial channels. Borrow money online with lesser hassles from Money Club.
Read: I Need 20000 Rupees Loan Urgently: 4 Ways To Help You
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