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Who Else Wants To Know The Mystery Behind Debt?

October 09, 20181 min read

Have you ever had to borrow money? Whether it was from a bank or from a person, have you ever had to borrow money?

 

What is Debt?

Debt is basically borrowing money. If we borrow money from a person, from a bank or from whatever, and you are expected to repay that money with some interest. Anything a little bit more than what you originally borrowed.

Why do we get debt? There are good reasons and they are bad reasons.

 

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Good Debt

So what's an example of good debt? For example, if you want to buy a house. For most of us getting a house is not something that you can pay for in full.

You might want to take a bank loan or mortgage, as they call it. You might have to approach financial institutions like "Hey, can I borrow some money" and the bank will give you interest rates and they say "Okay, I'll give you this loan, you buy a house" and then you pay back your mortgage every month. That's an example of good debt because if you didn't take up that loan you wouldn't be able to buy a house.

Bad Debt

Bad debt is defined as taking a loan that doesn't give you any benefits. For example, I borrow money from a friend just so I can go to the casino. Maybe I'll make money but it's unlikely. So that's bad debt and I owe that person money just because I didn't get any benefit from it.

 

So that's good versus bad debt. Now think about it. Where in your life have you seen good and bad debt? Whether you have any in your life. Comment below and we'll talk to you about it.

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