In a previous article, we talked about good debt and how we can make the most out of borrowed money. Nowadays, getting cash is easier—there are even fast cash loans online in the Philippines. In as much as easy things go, it’s also easy to think we can get away with not paying them back but lo and behold, bad debt will rear its head to haunt you until it’s paid.
So when do you know when a debt is going to get the best of you?
When a Loan is Too Big to be True, It Probably Is
One of the biggest indicators of a bad debt is if it is being given by a bad debtor or loaner. But when do you know if a debtor is going to put you in hot water? If it feels like you’re winning the Mega Lotto 6/45 draw, or if you’re granted an amount that feels bigger than what you deserve, it might be a bad debt waiting to happen. Make sure your interest rates are in check and that the loan that you’ll be granted is actually payable on reasonable terms. Think twice if it’s too big, like a 5-6 loan, i.e., you borrow at 5 and give back 6 in ratio (more popularly known as 5-6, ). Good loaners do background checks to see if you can handle the responsibility of a loan.
When you use Borrowed Money Improperly, it’s Bad Debt
If there are bad lenders, loaners, and debtors, there are also bad borrowers. Some borrowers ask to be lent money while appealing to emotions by saying that they need a loan for a medical expense, to start a business, to pay for home improvements, or to settle a bigger debt. They then end up paying the bare minimum for said things and use the rest of the money for gadgets, expensive food, travel, and what have you. If it weren’t for these types of borrowers, fast cash loans online might even be made faster in the Philippines! If a debt isn’t going to be used for productive purposes like we mentioned in a previous article, don’t take it.
When You Get Hung Up on Credit, It’s Going to End up as Bad Debt
Credit cards might be the closest we can get to having a genie. The piece of plastic might seem like magic but at the same time, there will eventually be a draw back if you aren’t careful with what you wish for. Credit is money that you don’t own so like with our previous entry, using a credit on whim and paying just the bare minimum will make you fall into the unending trap that is compounding interest. It’s easier to fall into this trap because some credit card companies just grant you a pre-activated card regardless of your credit history, purpose for making purchases, and even capacity to pay.
Nevertheless, even though we’re discussing bad credit, do remember: credit, debts and fast cash loan online in the Philippines, full on cash loan, even the debt you have with your friend or relative aren’t bad in and of themselves. They aren’t magical gifts with accompanying curses; it would be wiser to think of them as privileges that take a certain amount of discipline and responsibility to maximize.