Credit Cards and Bad debt

Everyone I know has a credit card. With attractive sign-on gifts from Apple AirPods to Samsonite luggages, these incentives are a sure-fire way for us to sign up for more than one credit card. However, with e-shopping happening at the click of the button, painless, quick and efficient shopping has loosen our purse strings.

Yes! During the Circuit breaker, I have been spending more time in front of my screen and inevitably I have been shopping on some e-commerce sights. From food delivery to home essentials, my credit card has been used heavily during this period. Just when you thought that you can save more, as you are going out less …

Thankfully, I don’t have any bad debts and I am able to pay off my credit card bills on time. However, in the course of my work, I have met many people who suffered from astronomical credit card bills. And in order for them to cover the minimum payments, they borrow from another credit card to cover the previous card. This is a definite no-no, as it just makes the debt bigger. Public education has greatly reduced the number of these cases from happening. Articles about debt consolidation and ways to eradicate credit card debt have been most useful.   

Bad Debt vs Good Debt

Recently, due to the world-wide pandemic, interest rates have been going down and personal loans are beginning cheaper. Recently I received a marketing email persuading me to pamper myself with a luxury purchase in bite sized installments. With interest rates going south, is it time to buy a new car, a new hi-fi system and maximize the low interest rates?

All of us desire a debt-free life but as much as we don’t like being in debt, many of us just don’t have the cash flow to buy a car or a house with cold hard cash. Taking a loan is a part of “Adulting” and learning how to manage good debt is part of the journey into adulthood.

There is such a thing known as a good debt. Examples of a good debt are taking a loan for home improvement or to study for a degree. So what qualifies as good or bad debt? This is dependent on the reason why you need to take the loan. To help you understand this concept better, a definite good read is good debt vs bad debt. There are many more examples, but here is a brief look at the quick reference images.

Personal Loans

It is vital we understand what a Personal Loan can be best utilised for. These loans are beneficial to refinance or consolidate other high interest debts. Essentially, one does not need to take out a Personal Loan to purchase a car or embark on an education as there are specific loans for these purposes. In fact, even if you want to start a business, you can try to look out for government loans to better lower your costs.

Now, if you are in a lot of debt, taking a personal loan will not make the debts go away. It would, however, give you air to breathe and help you reduce the interest that you need to pay.  A personal loan will also help you repay the debts in a structured way. This is important, as one of the major reasons why one is caught in deep debt, is due to a lack of financial discipline. Whatever the reason, do talk to a banker or friend on how to best handle your debts.

Before you talk to them, always get a feel for the latest Personal Loan rates, so that you are in a better position to talk to your banker. Here is a sample of a quick reference guide to personal loan rates:

At the end of the day, if you need to take a personal loan, make sure that you are able to repay it. The loan does give you added liquidity, but it is also means that you must pay back the principal with interest.